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TriWest protests U.S. contract award to UnitedHealth

WASHINGTON (Reuters) - TriWest Healthcare Alliance on Monday filed a protest against the Pentagon's decision to award a contract worth close to $20.5 billion to UnitedHealth Group for military health insurance coverage in 21 western states.

TriWest, which held the contract for 16 years, said it filed a protest with the Government Accountability Office because it viewed the government's evaluation of the bids as "flawed and unfair."

The company, which is comprised of nonprofit insurers and university hospital systems, said its bid was significantly lower than that of UnitedHealth, and the Pentagon decision did not account for transition risks and hundreds of millions of dollars in costs associated with switching coverage.

No comment was immediately available from the Pentagon or UnitedHealth Group.

GAO said it had received the protest and would issue a ruling by July 5.

TriWest said it had won the most recent TRICARE contract in July 2009, prompting a protest by UnitedHealth Group, which led to the rebidding of the competition in August 2011.

David McIntyre, president and chief executive of TriWest said it was inexplicable why the Pentagon awarded the contract to "UnitedHealth Group, a company with a long history of performance problems and legal issues, and with no history of providing health care to the military."

He said the Pentagon failed to conduct a sufficient and reasonable evaluation of UnitedHealth Group's proposal, and disregarded hundreds of millions of dollars in cost savings offered by TriWest through discounts.

The Pentagon awarded the TRICARE contract to UnitedHealth, the largest U.S. health insurer by market value, on March 16.

The contract, which begins April 1, 2013, includes a base period of about 10 months and five one-year options, and covers management of provider networks and referrals, medical management, enrollment, claims processing, customer service and access to data for about 2.9 million staff in 21 western states.

The goal, the Pentagon said in announcing the contract award, was to provide "beneficiary satisfaction at the highest level possible through the delivery of world-class health care."

(Reporting By Andrea Shalal-Esa; Editing by Phil Berlowitz and Carol Bishopric)

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