Military Benefits Contract Is Challenged
Foundation Health Corp. on Tuesday asked a federal court to block the Defense Department from allowing rival Aetna Government Health Plans to take over a contract to provide managed health care for 840,000 military dependents and retirees in California and Hawaii.
The Defense Department awarded Aetna the $3.5-billion, five-year contract in July. Rancho Cordova, Calif.-based Foundation and another unsuccessful bidder protested that the award process was unfair and illegal.
In a report last week, the U.S. General Accounting Office agreed with Foundation and the other objector, QualMed Inc. of Pueblo, Colo., that the process was flawed.
The Defense Department responded Monday by agreeing to reopen the process next month and provide potential bidders with clear information as to how bids will be evaluated. It will then accept revised bids and make a new selection by July 31.
But the department also instructed Aetna to carry out the first year of the contract, beginning Feb. 1 as scheduled. Aetna Government Health Plans, based in Rancho Bernardo, Calif., is a unit of Aetna Life & Casualty Co.
That decision prompted Foundation to file its complaint in federal court in eastern Virginia, where the Pentagon is.
“Our contention is that the contract was illegally awarded, so Aetna should not be installed in the interim,” Foundation spokesman Kurt Davis said Tuesday.
Foundation for five years has been prime contractor for a pilot version of the program--the Civilian Health and Medical Program of the Uniformed Services, or CHAMPUS. In Southern California, where 60% of the CHAMPUS enrollees live, Aetna ran the managed care network as a subcontractor to Foundation. The CHAMPUS contract accounted for 45% of Foundation’s $1.5 billion in revenue in the year ended June 30.
Aetna spokesman Bob Norton called the court complaint “unfortunate” and said the company is “very confident that whatever happens, we will continue to have the contract.”
In New York Stock Exchange trading Tuesday, Aetna’s stock jumped $1.375 to $60.25 a share; Foundation shares dropped 62.5 cents to close at $29.75, after trading as low as $28.625. Foundation’s complaint was filed after the market closed.
