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Humana gets 1-year extension on Tricare contract

Humana won a temporary extension of its contract to administer Tricare benefits through March 31, 2011, a reprieve granted as questions arise over how the health insurance program for military service members awarded its latest deals.

Louisville, Ky.-based Humana has been administering Tricare benefits in the South region since 1996, but lost out to UnitedHealth Group for the newest contract, which was originally supposed to begin in 2010. The next contract for the South region is worth an estimated $21.8 billion in revenue over the course of five years.Humana successfully challenged the bidding process. The U.S. Government Accountability Office recommended that Tricare re-evaluate the bids and, if necessary, re-award the contract.As of this story's deadline, it was unclear whether Tricare would follow that recommendation.

Meanwhile, the extension of Humana's current contract a year past its original expiration means the company will continue to draw income from the Tricare business even as widely anticipated cutbacks in Medicare Advantage diminish profits from its biggest line of business.

A Dec. 18, 2009, company filing with the Securities and Exchange Commission said Humana was "evaluating the impact" the contract extension would have on its projected 2010 earnings.

Neither Humana nor UnitedHealth Group had any other comment on Tricare's decision.

Meanwhile, one of the two other Tricare contracts also remains in dispute.

Health Net has been running Tricare benefits in the North region since 1996, but lost its bid for the next contract -- worth an estimated $16.7 billion in revenue over five years -- to Aetna.

Health Net protested the bid process, and the GAO subsequently recommended re-evaluating the bids for that contract. As of Dec. 22, 2009, there was no word on whether Health Net's contract would be extended through 2011.

Tricare's decisions were due within 60 days of the GAO's recommendations: Dec. 28, 2009, for the South region and Jan. 4 for the North region.

The incumbent contractor in the West region, TriWest Healthcare Alliance, won its bid to continue administering Tricare benefits for the next five years.

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