Humana Benefits From TRICARE Protests

Two of the four contracts awarded earlier this year to manage the U.S. military’s health insurance program TRICARE were protested. Humana (HUM) protested the award of the contract to United Health Group (UNH) to manage the Southern Region. Aetna’s (AET) win of the Western Region was protested by Health Net (HNT). Both Health Net and Humana had their protests upheld which has thrown the whole source selection process and awards into question.

Humana has now reported their financial results for the most recent quarter and stated that the delay in turning over the contract to Health Net has helped their bottom line. They company stated that profits were up sixty-five percent compared to last year’s numbers for the same period. The TRICARE contract is worth several billion dollars over its life and last year provided $3.3 billion in revenue to Humana. It can been seen why this is a contract worth fighting over.

Humana’s protest has been upheld but that does not necessarily mean they will win it if a re-compete is ordered. In the case of Aetna’s win the reasons were so egregious that the Government Accountability Office (GAO) basically directed the Defense Department to give it to Health Net. Aetna had hired a recent TRICARE employee who had a role in writing the proposal and may have provided confidential information about the contract and other company’s performance.

Some analysts are comfortable that due to its growing Medicare Advantage products that it might be OK if the company does not continue the TRICARE contract. Although the basic rule in defense contracting is keep the work you have and grow through new contract acquisitions. Keeping the TRICARE contract certainly will help Humana’s revenue and earnings which is why they protested the award in the first place.