Health Net (HNT) and Humana (HUM) Slammed On DoD TRICARE Contract Losses

Shares of Health Net Inc. (NYSE: HNT) and Humana Inc. (NYSE: HUM) are under heavy pressure, down 17% and 5% respectively, following news after the close that the managed care companies lost the Department of Defense TRICARE contract awards covering 9.4 million military personnel and dependents.

Yesterday, the U.S. Department of Defense said it would switch its military health benefits contracts to UnitedHealth Group (NYSE: UNH) and Aetna (NYSE: AET). UnitedHealth was awarded the South region contract, replacing Humana, and Aetna was awarded the North region, replacing Health Net.

The 5-year contracts will begin April 1, 2010 unless Humana and Health Net protest the award and delay the process. Both Humana and Health Net are evaluating whether they will protest the award.

The TRICARE contract loss will have the biggest impact on Health Net, as the contract represents over 30% of their 2009 earnings.

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