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U.S. finds improprieties in Aetna’s bid for military contract

Federal investigators said they have found improprieties in the bidding process that helped insurance giant Aetna land a $16 billion military health contract at the expense of Rancho Cordova-based Health Net Federal Services.

In particular, the Government Accountability Office said Tuesday, Aetna hired the former chief of staff of the Pentagon's TRICARE management agency, who might have furnished the company with proprietary information that helped it win the contract.

The GAO's findings do not automatically set aside the decision to award the TRICARE contract to Aetna. But the GAO recommended that the Pentagon "conduct a new evaluation of the offerers' proposals," including "a thorough review regarding the scope of the former (TRICARE) employee's access to nonpublic proprietary information."

Molly Tuttle, a spokeswoman for Health Net Federal Services, said, "These findings seemed very strong."

The GAO announcement was undoubtedly a welcome development for the 900 Health Net employees in Rancho Cordova whose jobs were in jeopardy because of the loss of the TRICARE contract.

Aetna officials could not be reached for comment.

Earlier this year, the Pentagon announced it was dropping Health Net in favor of Aetna to handle one of three regional health contracts totaling $55.5 billion and covering 9.4 million military personnel, retirees and their families.

Health Net has provided coverage in the program's North Region since 2004.

Health Net appealed the contract award to the GAO.

The decision sustaining Health Net's appeal was announced Nov. 4, but the reasons were not made public at the time.

The revelations were made public Tuesday on the Web site of the GAO, an independent, nonpartisan investigative arm of Congress.

In addition to concerns over the role of the former TRICARE employee, the GAO identified five other issues requiring further review.

Specifically, the agency said the award process did not adequately assess Aetna's qualifications to handle such a massive federal account.

The Pentagon has until early January to conduct its review. The current military contract expires April 1, 2010.

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