Military Contract Returned to Health Net


Health Net Inc. late Wednesday announced that the Department of Defense is returning a multi-billion dollar contract to provide health insurance to military personnel after initial winner Aetna Inc. was disqualified.

The new $2.8 billion TriCare contract includes five one-year renewal options for a total potential value of nearly $17 billion. It covers 2.9 million people, including retirees and family members, in 20 East Coast and Midwest states and the District of Columbia.

Health Net of Woodland Hills, through a predecessor company, had been involved with the program since it started in 1988. However, Aetna was awarded the new contract last June, but Health Net appealed that decision. The government temporarily suspended the contract’s transition to Aetna in November after a Government Accountability Office audit found significant errors with the bidding process.

Chief among the GAO’s complaints was the discovery that Aetna had hired a former TriCare employee who possessed knowledge of Health Net’s performance on past contracts.

“Health Net is honored to continue to serve our active duty, National Guard and Reserve members, and military retirees and their families in the North Region,” said Chief Executive Jay Gellert in a statement.

Aetna in its own statement said it was reviewing the decision and reiterated that the company “acted appropriately throughout the procurement process and that no non-public information was ever used in preparing the bid.”

In midday trading, Health Net shares were up $1.75, or nearly 8 percent, to $23.87 on the New York Stock Exchange.

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