- Cullman, Alabama


June 13, 2013

UnitedHealth's failure at Pentagon could risk future U.S. awards


Air Force veteran Michelle Linn worries that her two teenage boys will lose access to an autism treatment center because UnitedHealth Group has been slow to pay the provider.

The nation's biggest insurer took over a $20.5 billion contract to coordinate military health services on April 1. Since then, providers and beneficiaries have cited long delays in medical care and payments. It has been "one fiasco after another," said Linn, of Colorado Springs, Colo.

UnitedHealth's poor performance prompted a rebuke from the Defense Department, which accused the company of failing to comply with its contract and risking the health of active-duty military, retirees and their families. The failures blemish the insurer's reputation and may hurt the company's ability to win more government contracts, said Sheryl Skolnick, a Stamford, Conn.-based analyst at CRT Capital Group LLC.

"The egg on their face is pretty thick and it's bright yellow," Skolnick said. "The expectation was they would execute this flawlessly. It was a real stunner to see the headline that the Pentagon wasn't happy."

It would be difficult for defense officials to award another contract to Minnetonka, Minnesota-based UnitedHealth unless the company quickly fixes the snags, Skolnick said in a phone interview.

UnitedHealth cracked the U.S. military market with the contract, awarded in March 2012. The Pentagon spent almost $61 billion on health care during the year that ended Sept. 30, 2012, said Wayne Plucker, a global industry manager at Frost & Sullivan, a consulting and market research firm based in Mountain View, Calif.

The Colorado Springs area, home to Fort Carson, Peterson Air Force Base and the U.S. Air Force Academy, is part of the 21-state western coverage area under the contract for the military's Tricare health program. Other states covered in the contract include California, Hawaii, Minnesota and Arizona.

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