May 9, 2009 -- WellCare Health Plans Inc. swung to a first-quarter loss due to legal costs from a Medicaid-fraud case and increased costs at its Medicare Advantage private fee-for-service plans, a market WellCare is getting out of.
Still, results topped analysts' expectations.
Last week, the company agreed to pay $80 million to settle a Florida Medicaid fraud investigation that had already led to a management shake-up and the restatement of more than three years of its earnings.
WellCare administers medical benefits for about 2.5 million enrollees in Medicare and Medicaid health plans. While such programs are expected to see rising enrollments as the population ages and following the government's expansion of State Children's Health Insurance Program, they also are more vulnerable to shifts in government health policies.
WellCare reported a loss of $36.9 million, or 89 cents a share, compared with prior-year earnings of $1.3 million, or 3 cents a share, a year earlier. Excluding items such as legal costs, earnings fell to 29 cents from 52 cents.
Revenue increased 13% to $1.8 billion.
Analysts polled by Thomson Reuters most recently were looking for adjusted earnings of 18 cents on revenue of $1.77 billion.
The latest period included a 79% decline in investment and other income, which WellCare said lowered earnings by 19 cents.
WellCare's medical-benefits expense ratio, or the amount of premiums used to cover medical costs, rose to 86.7% from 86.2% amid lower premium rate growth at its Medicaid programs.
Total membership rose 60,000 from a year earlier to 2.46 million. Medicaid membership was up 10%, however, while total Medicare Advantage membership rose 32%. Its prescription drug plan membership was down 18%.
WellCare plans to exit fee-for-service Medicare Advantage contracts amid woes in that segment. The move next year is expected to affect some 110,000 individuals, or more than 40% of members in those plans.
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