Sierra loses appeal over insuring military personnel

Monday, Dec. 15, 2003 | 11:09 a.m.

Las Vegas-based Sierra Health Services Inc., the largest health insurer in Nevada, has lost an appeal of its losing bid to provide managed insurance benefits to military personnel in 23 eastern states.

The insurer's subsidiary, Sierra Military Health Services in Baltimore, lost a bid in August to provide managed care support services to about 2.8 million active and retired military personnel and their families through the U.S. Department of Defense's TRICARE program.

Sierra appealed the decision once the contract was awarded to Health Net Federal Services, a subsidiary of Health Net Inc. in California.

"We still believe that our bid was a superior bid to the competitor who was awarded the contract," said Peter O'Neill, Sierra vice president of public and investor relations. "We still believe there were serious factual and material errors in the decision-making process. For example, there were a number of items in our bid that apparently were not clear to the Department of Defense and we did not realize they were not clear. We were not given the opportunity to clarify those items."

Sierra already provides services for about 1.1 million military personnel in 13 eastern states and wanted to expand its contract since it already had infrastructure in place.

The U.S. General Accounting Office denied the combined appeal to reconsider Sierra and Aetna Inc. for the eastern-states contract. Sierra said it will look at possible alternatives including a hearing before the Court of Federal Claims.

O'Neill said the appeal to the GAO is not an uncommon process for any defense contractor denied a contract and Sierra will decide in the next few days what it will do next.

Sierra gained a TRICARE contract in 1998 to provide services such as scheduling medical appointments, making doctor referrals and offering and maintaining health-care plans. The contract it lost would have provided services to the 13 states it served and 10 additional states.