WellCare knows that to get well, all you need is a little care. WellCare Health Plans provides managed-care administrative services to government-funded health care programs that provide health care benefits via Medicaid, Medicare, and various State Children's Health Insurance Programs (SCHIPS). Services include benefits management, claims processing, and other services. WellCare Health Plans administers its Medicaid plans under various brands such as Staywell and HealthEase in Florida; WellCare in Ohio (ending in 2013), Georgia, Kentucky, and New York; Harmony in Illinois; and 'Ohana in Hawaii. The company's Medicare prescription-drug and Medicare Advantage plans operate primarily under the WellCare brand.
WellCare serves some 2.6 million members nationwide. About 1.5 million customers are Medicaid members (including SCHIP members), and more than 1.1 million of those are recipients of Temporary Assistance to Needy Families (TANF) benefits. The Medicare customers include about 1 million prescription members throughout the US, while its 135,000 Medicare Advantage customers are largely enrolled in HMO coordinated care plans (CCPs) in about a dozen states.
After several years of reporting decreased earnings (due to troubles including legal and regulatory issues), in 2011 WellCare was able to increase both its revenues and net income levels. The firm reported a 12% increase in sales to $6.1 billion and a return to profitability with a $264 million net income figure that year, largely attributed to growth in the core Medicare and Medicaid markets, as well as decreased legal expenses and successfully implemented cost control efforts.
The company seeks growth by expanding Medicaid coverage in the states where it already has a presence, as well as the occasional entrance into new states where conditions are attractive. For instance, in 2011 it gained Medicaid TANF contracts in Hawaii and entered the new Medicaid territory of Kentucky, giving its annual Medicaid enrollment levels a 12% boost. However, as a provider of services to federal and state Centers for Medicare & Medicaid Services (CMS) entities, WellCare is also subject to the loss of contracts when they are awarded to different providers. For instance, in 2012 the firm's Medicaid contracts in Missouri and Ohio expired and were not renewed for 2013; the state of Ohio, however, extended its contract for a transitional period (possibly through mid-2013) during which WellCare may provide services to its Medicaid members until they transfer to other plans.
WellCare successfully added more members to its Medicare plans in 2011, doubling the membership level of its Medicare Advantage programs (especially in special needs plans for members who qualify for both Medicare and Medicaid coverage) and increasing Part D enrollment by 27%. Like the Medicaid programs, covered territories for Medicare Advantage plans can shift each year: WellCare added Hawaii to its territory roster in 2010, but exited the Indiana market the following year.
WellCare decided to exit the less-profitable Medicare Advantage private-fee-for-service (PFFS) market in 2010 after CMS changed how the plans were regulated. The move affected about 110,000 customers in some 40 states and caused a dip in Medicare enrollment that year.
Mergers and Acquisitions
In 2012 WellCare agreed to acquire the South Carolina Medicaid business of UnitedHealth. The purchase adds some 65,000 members throughout most of South Carolina and gives WellCare further opportunities for growth in the region.
Though it successfully rejuvinated its finances in 2011, WellCare spent several years prior to 2011 cleaning up a rash of regulatory and legal difficulties. The company's troubles started with a raid on its headquarters in late 2007 and a subsequent federal investigation into possible Medicaid fraud in the Florida market (which also led to a management shakeup and the restatement of the company's finances for several previous years). WellCare settled the fraud allegations by paying some $80 million to the US Attorney's Office through an agreement reached in 2009. As part of the agreement, WellCare agreed to operate under the supervision of an independent monitor to avoid facing formal criminal charges; the three-year supervision term was successfully completed in 2012.
In addition, the company agreed to pay some $138 million to settle a handful of civil whistleblower suits in 2011; that settlement was finalized in 2012. Other related settlements include a $10 million payout in 2009 to resolve charges leveled by the SEC that it failed to refund money due a Florida health care administration agency, and a 2011 shareholder class action settlement for misrepresentation that cost WellCare some $200 million in cash and bonds. Personal criminal charges for three former officers are still pending. – less