VA awards $373M contract to Optum for health insurance carrier services in February 2024

Contract Overview

Contract Amount: $373,471,962 ($373.5M)

Contractor: Optum Public Sector Solutions, Inc.

Awarding Agency: Department of Veterans Affairs

Start Date: 2024-02-01

End Date: 2024-02-29

Contract Duration: 28 days

Daily Burn Rate: $13.3M/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

Official Description: EXPRESS REPORT: R1 FY 24 2ND QTR FEB

Place of Performance

Location: ROCKVILLE, MONTGOMERY County, MARYLAND, 20850

State: Maryland Government Spending

Plain-Language Summary

Department of Veterans Affairs obligated $373.5 million to OPTUM PUBLIC SECTOR SOLUTIONS, INC. for work described as: EXPRESS REPORT: R1 FY 24 2ND QTR FEB Key points: 1. Contract value represents significant investment in health insurance carrier services. 2. Full and open competition indicates a potentially competitive bidding process. 3. Fixed-price contract type may offer cost certainty for the government. 4. Short duration of the delivery order suggests a specific, time-bound need. 5. Contractor, Optum Public Sector Solutions, Inc., is a major player in the health IT and services sector. 6. The contract falls under the Direct Health and Medical Insurance Carriers NAICS code.

Value Assessment

Rating: good

The contract value of $373.5 million for a single month of service is substantial. Benchmarking against similar contracts for health insurance carriers is challenging due to the specific nature of the services and the short duration. However, the firm fixed-price structure suggests an attempt to control costs. Further analysis would require comparing the per-member-per-month cost or specific service delivery metrics against industry standards and other VA contracts for similar populations.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, suggesting that multiple bidders had the opportunity to submit proposals. This method is generally preferred as it allows for the widest possible range of potential contractors to compete, theoretically leading to better pricing and service offerings. The number of bidders is not specified, but the open competition is a positive indicator for price discovery.

Taxpayer Impact: Full and open competition generally benefits taxpayers by fostering a competitive environment that can drive down costs and improve the quality of services received.

Public Impact

Veterans will benefit from continued access to health insurance carrier services. The contract supports the delivery of essential healthcare administrative and insurance functions. Services are likely concentrated in areas where the VA operates and serves its beneficiaries. The contract supports jobs within the health insurance and administrative services sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

The short duration of the delivery order (28 days) raises questions about the long-term strategy for these services and potential for contract fragmentation.
Without details on the specific services rendered, it's difficult to assess the full value and impact of this significant monthly expenditure.

Positive Signals

Awarded under full and open competition, indicating a robust bidding process.
Firm fixed-price contract type provides cost predictability for the VA.
Optum Public Sector Solutions, Inc. is an established entity in the government contracting space, suggesting experience.

Sector Analysis

This contract falls within the health insurance and managed care sector, a critical component of the U.S. healthcare system. The North American Industry Classification System (NAICS) code 524114, Direct Health and Medical Insurance Carriers, encompasses establishments primarily engaged in underwriting and administering health, medical, and dental insurance. Spending in this sector by federal agencies like the VA is substantial, supporting the administration of healthcare benefits for beneficiaries. Comparable spending benchmarks would typically involve analyzing per-member costs for similar insurance administration services across different government programs or private sector contracts.

Small Business Impact

The provided data indicates that small business participation (ss: false, sb: false) was not a specific set-aside for this contract. Therefore, there are no direct subcontracting implications or specific impacts on the small business ecosystem stemming from a set-aside requirement. However, the prime contractor, Optum, may engage small businesses as subcontractors, though this information is not detailed in the provided data.

Oversight & Accountability

The Department of Veterans Affairs (VA) has established oversight mechanisms for its contracts, including this one. As a delivery order under a larger contract vehicle, it would be subject to the VA's internal contract management and performance monitoring processes. Transparency is generally facilitated through contract databases like FPDS. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected or identified during the contract's performance or close-out.

Related Government Programs

TRICARE Health Insurance Contracts
Medicare Administrative Contracts (MACs)
Medicaid Managed Care Contracts
Federal Employee Health Benefits (FEHB) Program Contracts

Risk Flags

Short contract duration for high value
Lack of detailed service scope in report

Frequently Asked Questions

What is this federal contract paying for?

Department of Veterans Affairs awarded $373.5 million to OPTUM PUBLIC SECTOR SOLUTIONS, INC.. EXPRESS REPORT: R1 FY 24 2ND QTR FEB

Who is the contractor on this award?

The obligated recipient is OPTUM PUBLIC SECTOR SOLUTIONS, INC..

Which agency awarded this contract?

Awarding agency: Department of Veterans Affairs (Department of Veterans Affairs).

What is the total obligated amount?

The obligated amount is $373.5 million.

What is the period of performance?

Start: 2024-02-01. End: 2024-02-29.

What specific health insurance carrier services were provided under this $373.5 million delivery order?

The provided data identifies the NAICS code as 524114 (Direct Health and Medical Insurance Carriers) and the contractor as OPTUM PUBLIC SECTOR SOLUTIONS, INC. This suggests services related to underwriting, administering, and processing health insurance claims and benefits. Given the substantial value and the contractor's profile, these services likely involve managing a significant portion of the VA's health insurance operations for a specific cohort of beneficiaries during February 2024. This could include claims adjudication, provider network management, member enrollment, and customer support. However, the exact scope of services is not detailed in the express report and would require examination of the underlying contract documents.

How does the cost of this one-month contract compare to similar health insurance carrier services procured by the VA or other federal agencies?

Directly comparing the $373.5 million cost for a single month (February 2024) to similar contracts is difficult without more granular data on the services rendered and the beneficiary population covered. Federal health insurance contracts vary widely based on the scope of benefits, the number of individuals covered, administrative overhead, and specific performance metrics. For instance, contracts for the Federal Employee Health Benefits (FEHB) program or TRICARE involve different populations and benefit structures. To perform a meaningful comparison, one would need to analyze per-member-per-month (PMPM) costs, administrative cost ratios, and specific service delivery outcomes against benchmarks for similar government health insurance administration contracts or large-scale private sector agreements.

What is Optum Public Sector Solutions, Inc.'s track record with the Department of Veterans Affairs and other federal health programs?

Optum Public Sector Solutions, Inc., a subsidiary of UnitedHealth Group, has a significant track record in providing health IT and services to government agencies, including the Department of Veterans Affairs. They have been involved in various initiatives aimed at modernizing healthcare systems, managing health data, and administering benefits. Their experience spans across federal programs like Medicare, Medicaid, and TRICARE, as well as state and local health initiatives. For the VA specifically, Optum has previously been awarded contracts related to health record management, data analytics, and claims processing. Their extensive experience in the healthcare sector suggests a capacity to handle large and complex contracts like the one awarded in February 2024.

What are the potential risks associated with a $373.5 million contract awarded for only 28 days?

A primary risk associated with a very short-duration, high-value contract like this $373.5 million delivery order is the potential for inefficient resource allocation and a lack of long-term strategic planning. Awarding such a significant sum for just 28 days might indicate a stop-gap measure or an emergency procurement, which can sometimes lead to higher costs than a longer-term, more strategically planned contract. There's also a risk of service disruption if the transition to or from this contract is not managed effectively. Furthermore, the short timeframe may limit the contractor's ability to fully optimize processes or achieve significant performance improvements, potentially impacting the overall value for money. It raises questions about whether this represents a recurring need or a one-off requirement.

How does the 'full and open competition' for this contract impact taxpayer value compared to other procurement methods?

Awarding this contract through 'full and open competition' is generally beneficial for taxpayer value. This method allows any interested and qualified contractor to submit a bid, fostering a competitive environment. Competition typically drives down prices, encourages innovation, and leads to higher quality services as contractors vie for the award. Unlike sole-source or limited competition procurements, full and open competition reduces the risk of contractors facing less pressure to offer their best pricing or performance. While the administrative effort to manage a broad competition can be higher, the potential for cost savings and improved service delivery generally outweighs these costs, ultimately benefiting taxpayers through more efficient use of public funds.

Industry Classification

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

Product/Service Code: MEDICAL SERVICES › GENERAL HEALTH CARE SERVICES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Unitedhealth Group Incorporated

Address: 3237 AIRPORT RD, LA CROSSE, WI, 54603

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $373,471,962

Exercised Options: $373,471,962

Current Obligation: $373,471,962

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: 36C79119D0004

IDV Type: IDC

Timeline