UnitedHealth Group Inc. is suing the Department of Defense over its decision to award a lucrative contract to rival health insurer Humana Inc.
The lawsuit, filed Tuesday with the U.S. Court of Federal Claims, follows a ruling last week by the Government Accountability Office denying a formal protest of the Department of Defense's decision by UnitedHealth.
The Tricare South Region contract involves providing health coverage for about 3 million active duty and retired military members and their families in several Southern states.
The contract starts in 2012 and was initially awarded to UnitedHealth two years ago, but Humana successfully protested that decision. UnitedHealth fired back with its own protest, but it was rejected, so it turned to the courts.
Lori McDougal, CEO of UnitedHealth's military health division, claims the Pentagon disregarded its own goals for the contract and is placing military families' access to quality health care at risk.
"The stakes for military families are simply too high, and the deficiencies in the contracting process too significant, for the Department of Defense to proceed with implementing this contract as it stands," McDougal said.
Humana and the Department of Defense did not immediately return calls seeking comment late Tuesday.
The new contract gives Humana five renewable option periods of a year each starting in April 2012.
Humana, based in Louisville, Ky., is the fifth-largest health insurer based on enrollment, and military coverage is a key part of its business. Its shares slipped 2 cents to $81.62 in aftermarket trading on Tuesday. The shares added $1.38 to $81.64 during the regular session.
UnitedHealth Group is the second-largest insurer based on enrollment, trailing WellPoint Inc. Its shares ended the regular session up 95 cents, or 1.9 percent, to $52.22.