DoD awards $892M health insurance contract to United Concordia Companies, Inc. for 6 years

Contract Overview

Contract Amount: $892,285,778 ($892.3M)

Contractor: United Concordia Companies, Inc.

Awarding Agency: Department of Defense

Start Date: 2008-09-26

End Date: 2014-07-31

Contract Duration: 2,134 days

Daily Burn Rate: $418.1K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 3

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

Official Description: AWARD OF CONTRACT

Place of Performance

Location: HARRISBURG, DAUPHIN County, PENNSYLVANIA, 17110

State: Pennsylvania Government Spending

Plain-Language Summary

Department of Defense obligated $892.3 million to UNITED CONCORDIA COMPANIES, INC. for work described as: AWARD OF CONTRACT Key points: 1. Contract value of $892M over 6 years suggests significant long-term commitment to a single provider. 2. Awarded under full and open competition, indicating a potentially competitive bidding process. 3. The firm-fixed-price contract type shifts risk to the contractor, potentially stabilizing costs. 4. A 6-year duration allows for stable service delivery but may limit opportunities for market innovation. 5. The contract's focus on health insurance carriers places it within a critical sector for military personnel and families. 6. The absence of small business set-aside suggests larger prime contractors are expected to handle this scope.

Value Assessment

Rating: good

The $892.3 million award over approximately six years for health insurance carriers represents a substantial investment by the Department of Defense. Benchmarking this against similar large-scale health insurance contracts within the federal government is challenging without more granular data on covered populations and service levels. However, the firm-fixed-price structure is generally favorable for cost control. The per-unit cost, if calculable based on covered lives, would be a key metric for assessing value, but this data is not provided.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, suggesting that multiple bidders were likely considered. The presence of 3 bids indicates a degree of competition, which is generally positive for price discovery and value for taxpayers. The specific details of the bidding process, including the number of proposals received and the evaluation criteria, would provide further insight into the effectiveness of the competition.

Taxpayer Impact: Full and open competition generally leads to better pricing for taxpayers by encouraging multiple companies to offer their best terms. A competitive process helps ensure the government is not overpaying for the services rendered.

Public Impact

Military personnel and their families will benefit from consistent access to health and medical insurance services. The contract ensures the provision of direct health and medical insurance carrier services, crucial for healthcare access. Services are likely to have a broad geographic impact, covering beneficiaries across various locations. The contract supports jobs within the health insurance industry, both directly with the contractor and indirectly through subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Long-term contract duration could lead to complacency or reduced incentive for innovation.
Lack of specific performance metrics makes it difficult to assess the quality of services delivered.
Potential for cost overruns if not managed tightly, despite the fixed-price nature, due to scope creep or unforeseen circumstances.

Positive Signals

Awarded through full and open competition, suggesting a robust selection process.
Firm-fixed-price contract type provides cost certainty for the government.
Long-term award indicates a stable and reliable provider for essential services.
Contractor has a significant duration to establish and maintain service levels.

Sector Analysis

The health insurance sector is a critical component of the healthcare industry, with significant federal spending directed towards providing coverage for military personnel, veterans, and other beneficiaries. This contract falls under the NAICS code 524114 (Direct Health and Medical Insurance Carriers), a segment characterized by large, established players. Federal spending in this area is substantial, driven by the need to offer comprehensive healthcare benefits. Comparable spending benchmarks would involve analyzing other large TRICARE contracts or similar health insurance provisions for federal employees.

Small Business Impact

The contract was not awarded as a small business set-aside, and the 'sb' field is false, indicating that small business participation was not a primary set-aside objective for this specific award. While there's no explicit subcontracting requirement detailed here, large prime contractors like United Concordia often engage small businesses for specialized services. The impact on the small business ecosystem would depend on the extent to which they are included in the supply chain for this contract.

Oversight & Accountability

Oversight for this contract would typically fall under the Defense Health Agency (DHA) and potentially the Department of Defense's Inspector General. Mechanisms would include contract performance reviews, audits, and compliance checks. Transparency is generally maintained through contract award databases and reporting requirements, though detailed operational oversight specifics are often internal. The IG's office would have jurisdiction to investigate fraud, waste, and abuse.

Related Government Programs

TRICARE Health Insurance Programs
Federal Employee Health Benefits (FEHB) Program
Department of Veterans Affairs Health Services
Medicare and Medicaid Programs

Risk Flags

Long contract duration may limit flexibility and adoption of new technologies.
Lack of detailed performance metrics in award data makes quality assessment difficult.
Potential for contractor to reduce service quality to maintain profitability under fixed-price terms.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $892.3 million to UNITED CONCORDIA COMPANIES, INC.. AWARD OF CONTRACT

Who is the contractor on this award?

The obligated recipient is UNITED CONCORDIA COMPANIES, INC..

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Health Agency).

What is the total obligated amount?

The obligated amount is $892.3 million.

What is the period of performance?

Start: 2008-09-26. End: 2014-07-31.

What is the historical spending trend for health insurance contracts with United Concordia Companies, Inc. by the Department of Defense?

Analyzing historical spending trends for United Concordia Companies, Inc. with the Department of Defense requires access to historical contract databases. Without specific historical data for this contractor and agency, it's difficult to provide precise figures. However, large health insurance providers often hold multiple, long-term contracts with federal agencies. The $892.3 million awarded here over six years suggests a significant, ongoing relationship. Typically, federal agencies aim for stable, predictable spending on essential services like health insurance, but also monitor for cost efficiencies and competitive pricing over time. Fluctuations in spending could be influenced by changes in beneficiary populations, healthcare cost inflation, and shifts in policy or benefit structures.

How does the per-unit cost of this contract compare to other similar federal health insurance contracts?

Determining the per-unit cost for this contract and comparing it to similar federal health insurance contracts is challenging without knowing the number of covered lives or specific service units. The award amount of $892.3 million is a total contract value. To perform a per-unit cost analysis, one would need to divide this total by the average number of individuals covered or the total number of services rendered over the contract's duration. Federal health insurance contracts, such as those under TRICARE or the Federal Employee Health Benefits (FEHB) program, vary widely in scope, covered populations, and benefit packages. A meaningful comparison would require identifying contracts with similar beneficiary demographics (e.g., active duty military, dependents) and benefit levels, and then calculating a standardized per-member-per-month (PMPM) cost.

What are the key performance indicators (KPIs) used to evaluate the performance of United Concordia Companies, Inc. under this contract?

The specific Key Performance Indicators (KPIs) for this contract are not detailed in the provided data. However, for federal health insurance contracts, common KPIs typically revolve around network adequacy, claims processing timeliness and accuracy, beneficiary satisfaction, access to care, and compliance with regulations. For example, metrics might include the percentage of providers within a certain network radius, the average time to process claims, beneficiary complaint resolution rates, and adherence to service level agreements (SLAs). The Defense Health Agency (DHA) would establish and monitor these KPIs to ensure the contractor is meeting the required standards for healthcare delivery and administration to military personnel and their families.

What is the risk profile associated with a firm-fixed-price contract of this magnitude and duration?

A firm-fixed-price (FFP) contract of this magnitude ($892.3 million) and duration (6 years) generally shifts significant performance and cost risk to the contractor, United Concordia Companies, Inc. The primary risk for the government is ensuring the contractor has adequately priced the contract to cover all potential costs and profit, and that the fixed price remains competitive throughout the term. Risks for the contractor include unforeseen increases in healthcare costs, regulatory changes, or operational challenges that could erode profit margins. For the government, the risk lies in the potential for the contractor to cut corners on quality or service to maintain profitability, although robust oversight and performance metrics should mitigate this. The long duration also introduces risk related to market changes or technological advancements that could make the contracted services less optimal over time.

How does the competition level (3 bidders) impact the value proposition for the government in this contract?

Having three bidders for this contract suggests a moderate level of competition. While more bidders generally lead to more competitive pricing, three offers indicate that the market has at least a few capable providers willing to compete for this significant contract. This level of competition likely helped the Department of Defense achieve a reasonable price, preventing a situation where a sole-source or single-bid scenario could lead to inflated costs. The government would have evaluated these three proposals based on technical merit, past performance, and price to determine the best value. The specific details of the proposals and the evaluation process would determine the extent to which this competition translated into optimal value for taxpayers.

Industry Classification

NAICS: Finance and Insurance › Insurance Carriers › Direct Health and Medical Insurance Carriers

Product/Service Code: MEDICAL SERVICES › MEDICAL, DENTAL, AND SURGICAL SVCS

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: H9400207R0002

Offers Received: 3

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Highmark Inc (UEI: 067096644)

Address: 4401 DEER PATH RD, HARRISBURG, PA, 17110

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $1,194,587,073

Exercised Options: $952,966,576

Current Obligation: $892,285,778

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline