The U.S. Department of Defense said it has awarded military health care contracts worth billions of dollars to Aetna Inc. (AET), UnitedHealth Group Inc. (UNH) and TriWest Healthcare Alliance. 

This ends previous alliance with Health Net Inc. (HNT), and Humana Inc. (HUM). Aetna will take over the program in the North region, replacing Health Net Inc., while UnitedHealth will replace Humana Inc. in the South after more than a year of government review. 

Tricare is the Defense Department's health care program for military members, their families and survivors. The program provides civilian health benefits for military personnel, military retirees and their dependents, awarded a base contract of $2.48 billion to Aetna and $3.73 billion to UnitedHealth.

Under the support contract for the northern U.S., Aetna will provide health care and administrative services for about 2.8 million members of the military based in the 21 states in the region and the District of Columbia. 

Aetna's potential contract, estimated worth up to $16.68 billion, includes a 10-month transition period and one option period worth $2.84 billion, plus five one-year options and a transition-out period.

UnitedHealth's contract covers 11 states in the Southern region and is estimated at $21.83 billion. The contract is estimated to be worth up to $21.83 billion. The deal includes a 10-month transition period, five one-year options and a transition-out period.

TriWest, supported by Blue Shield of California, won a $16 billion contract to provide coverage in the West. It replaced the Civilian Health and Medical Program of the Uniformed Services, or CHAMPUS. The deal, if all options are exercised, could be worth $16,96 billion.

Aetna said it would begin managing the plan in the region as of April 1, 2010. Susan M. Peters, president of Aetna Government Health Plans said, "We're eager to begin serving the beneficiaries of the TRICARE program and will immediately set our planned transition activities into motion."

Health Net said it was "disappointed" to have lost its northern Tricare contract. In a statement Steven Tough, president of Health Net Federal Services said, "We anticipate that a debriefing will be conducted within the next couple weeks. We will consider the information provided at the debriefing, and within two weeks following, we will determine whether we will accept or challenge the award decision."

Humana Inc. currently under contract to handle Tricare's southern members through March 31, 2010, said it can't yet forecast what impact, if any, the loss of the Tricare contract may have upon its earnings for the year ending Dec. 31, 2009.

In a statement Dave Baker, president and CEO of Humana Military said, "Humana Military is disappointed with the decision by the Department of Defense and looks forward to obtaining further clarity via a debriefing on the bidding process. Our company will evaluate its strategic options with respect to the government's decision, including protesting the award, and will act expeditiously to best position Humana for continued success."

TriServ, which provides services in the South, said that after a Wednesday debriefing it will review all available information and likely file a formal bid protest with the government in an effort to reverse the Defense Department's decision.               

"It is difficult to understand the logic of the process that brought the Department of Defense to this conclusion," Charlie Abell, TriServ's CEO said. "The robustness of our provider network and our competitive pricing proposal, combined with the excellent past performance of our owner companies makes our loss very hard to accept."