UnitedHealth sues DoD for losing $23B military contract

By Dina Overland

UnitedHealth Group (NYSE: UNH) is suing the U.S. Department of Defense after it lost a $23.5 billion Tricare South contract to rival insurer Humana (NYSE: HUM). In a lawsuit filed in the U.S. Court of Federal Claims, UnitedHealth wants the DoD to reinstate its contract with Tricare, which covers health benefits for 3 million active and retired military members and their families.

UnitedHealth won the contract to serve Tricare's south region in 2009, but lost the deal following a protest earlier this year by Humana, which previously held the contract. UnitedHealth then filed its own dispute, but the Government Accountability Office announced last week that it won't support UnitedHealth's claims, reports the Minneapolis Star-Tribune.
The lawsuit alleges that Humana offered steep discounts in its reimbursement fees that would pay doctors and hospitals rates below the Medicare system, which could force doctors to leave the military healthcare network, according to Reuters.

"The deficiencies in the contracting process are too significant for the Department of Defense to proceed with implementing this contract as it stands," said Lori McDougal, head of UnitedHealth's military health division, in a statement. "The Pentagon disregarded its own stated goals for this contract," McDougal added.

Humana has argued that it already proved its ability to get good discounts from Tricare network providers, National Underwriter notes.