Triwest in Arizona Loses Military Health Benefits Contract

March 20, 2012

Phoenix, Ariz.-based TriWest Healthcare Alliance has lost a $20.5 billion contract to manage health benefits for U.S. military families, and company officials say 1,000 jobs in Arizona are now at risk.

The U.S. Department of Defense announced Friday that it chose UnitedHealth Group over TriWest to serve military family members across 20 western states.

“We are disappointed,” TriWest chief executive David McIntyre said. “We do this work well by every measure. We do it very efficiently for the government.”

TriWest representatives plan to meet with department officials next week to learn why the company did not win the contract, the Arizona Republic reported.

McIntyre said TriWest will file a protest if the company discovers a legitimate reason to do so after meeting with department officials. Otherwise, he said operations will start to wind down after TriWest’s contract with the department ends in March 2013.

TriWest employs about 1,700 people across its territory, including 1,000 in Arizona. The company has managed military health benefits for the region for 16 years.

“If at the end of the day the decision stands, we will not be shutting the doors of our operation for more than a year,” McIntyre said. “It will be hard for our people. We will stay focused on what we are responsible to do.”

UnitedHealth Group refused to discuss the contract award. The company manages military health benefits through its UnitedHealth Military & Veterans unit, which operates from its headquarters in Minnetonka, Minn.

UnitedHealth Group employs more than 2,800 people in Arizona. It has no UnitedHealth Military & Veterans employees in Arizona, and it was unclear Friday whether the company would add any Arizona jobs based on the new contract.

In July 2009, the federal government awarded the western region contract to TriWest. It reopened bidding in April 2011 based on UnitedHealth Group’s protest of the contract award. At the time, UnitedHealth Group said the Department of Defense forced contractors to focus on low costs instead of quality care.

The federal government evaluates health-insurance contractors based on technical proficiency, performance and price.

In September, TriWest agreed to pay the federal government $10 million to settle whistle-blower claims that the company had failed to pass along discounted rates to the government.

TriWest had been accused of overbilling the federal government for medical services provided to military personnel and their families. From 2004 to 2010, TriWest reportedly submitted claims from health care providers at rates that were more expensive than discounted rates the insurer had negotiated.

An internal audit found that about $3.5 million in claims were submitted at more expensive rates. A TriWest spokesman said Friday the company found mistakes on 3,000 of 50 million claims paid over a six-year period.

“We recouped much of that for the government, and what we didn’t recoup, we paid the government back,” spokesman Scott Celley said.

Celley said TriWest does not know whether the whistle-blower suit had any effect on the federal government’s contract award.

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