The U.S. Defense Department is shuffling the insurance players in the Tricare program, which provides healthcare coverage for U.S. military members and their families.
Last week the department awarded multiyear contracts worth $58 billion to Humana and Centene Corp. to manage the coverage, surprisingly booting incumbent health insurer UnitedHealthcare in the process.
Humana's five-year deal, which consists of five one-year options, is estimated to cost federal taxpayers $40.5 billion. Centene and its newly acquired Health Net will receive $17.7 billion over five one-year contract periods.
In 2014, the Defense Department and Defense Health Agency decided to alter the structure of the program. Instead of dividing it into three regions (North, South and West), the government wanted to consolidate to two coverage areas (East and West).
Humana, which had managed the South region, will now provide coverage for 6 million Tricare members in the new 32-state East region, essentially absorbing most of UnitedHealthcare's members. Centene will gain the 21-state West region, which covers about 3.4 million people. Iowa, Missouri and Texas will include both companies.
The contracts are expected to begin April 2017, pending the appeals process.
UnitedHealthcare spokesman Bruce Jasurda said the company is “evaluating next steps.” In 2015, it had about 3 million Tricare members and the contract brought in an estimated $650 million in revenue.