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ARTICLE UnitedHealthcare Sues Department of Defense Over TRICARE South Region Contract

MINNETONKA, Minn. (June 21, 2011) – UnitedHealthcare today filed suit with the U.S. Court of Federal Claims over the Department of Defense's (DoD) handling of the TRICARE South Region contract.

"The stakes for military families are simply too high, and the deficiencies in the contracting process too significant, for the Department of Defense to proceed with implementing this contract as it stands," said Lori McDougal, CEO of UnitedHealthcare's military health division. "The Pentagon disregarded its own stated goals for this contract, and military families' access to quality health care in the South will be put at risk as a result.

"UnitedHealthcare is committed to serving military members and their families with the best possible access to quality doctors, specialists and health care facilities," McDougal said. "We will continue to pursue that mission and are prepared to do our part to help members of our nation's uniformed services gain access to the health care they need and deserve."

The legal action follows the Government Accountability Office's (GAO) decision last week to deny UnitedHealthcare's protest of the TRICARE South Region contract award to Humana.

On July 13, 2009, the Defense Department's TRICARE Management Activity (TMA) awarded UnitedHealthcare its South Region contract. The incumbent contractor then filed a protest with the GAO. On February 25, 2011, after 20 months and 13 amendments to its original solicitation, TMA reversed its selection of UnitedHealthcare, and instead retained the incumbent, Humana Military Healthcare Services.

UnitedHealthcare filed a formal protest with the GAO on March 7, 2011. That protest was denied by the GAO on June 14. Neither the GAO protest nor UnitedHealthcare's legal action will in any way impact the current benefits TRICARE members receive in 11 Southern states, including Alabama, Arkansas, Florida, Georgia, Kentucky (only in the Ft. Campbell area), Louisiana, Mississippi, Oklahoma, South Carolina, Tennessee and Texas (excluding the El Paso area).

Implications for West Region Contract

Also in 2009, the Defense Department awarded the TRICARE West Region contract to the incumbent, which has held the contract since 1996. UnitedHealthcare, which competed for that contract, filed a protest with the Department of Defense, based on a number of issues with the review and selection process.

In early 2011, UnitedHealthcare won that agency protest and the Pentagon agreed to reevaluate the TRICARE West contract proposals. However, the Pentagon has indicated that it will go down the same risky path it chose in the South Region by inviting offerors to guarantee cuts in payments to doctors and hospitals in the TRICARE West network. The Department will re-open the contract solicitation, but the negative long-term implications for TRICARE members in the West are clear if the same network discount guarantees that threaten health care access in the South are put in place in the West.

A recent report from the GAO explored health system access under TRICARE and found that low reimbursement rates have made it more difficult for TRICARE beneficiaries to find care providers. This is consistent with the findings from a recent Harris Interactive/UnitedHealthcare survey of physicians across 10 states in the TRICARE South region that found that approximately two-thirds of physicians who do not participate in the TRICARE network cite low reimbursements as a reason. Additionally, more than 85 percent of physicians said they will limit the number of new TRICARE patients they accept, stop accepting new TRICARE patients, or drop out of the network altogether if reimbursements are further discounted.

The TRICARE system administers health care plans for 9.6 million beneficiaries worldwide as a vital supplement to the military health system.

About UnitedHealth Group

UnitedHealth Group (NYSE: UNH) is a diversified health and well-being company dedicated to helping people live healthier lives and making health care work better. With headquarters in Minnetonka, Minn., UnitedHealth Group offers a broad spectrum of products and services through two distinct platforms: UnitedHealthcare, which provides health care coverage and benefits services; and Optum, which provides information and technology-enabled health services. Through its businesses, UnitedHealth Group serves more than 75 million people worldwide. Visit BetterMilitaryCare.com for more information.