WellCare Health Plans, a private Medicare and Medicaid managed-care company, beat analysts' adjusted profit estimates in the third quarter. But the insurer revealed it will continue to face challenges next year.
Net income declined 70% to $19.3 million, while revenue in the quarter soared 36% to $3.4 billion. New members fueled the top-line growth, as WellCare's enrollment grew 43% to more than 4 million people. Much of that came on the Medicaid side, which represents almost two-thirds of WellCare's business.
Excluding one-time charges, WellCare said earnings per diluted share were 77 cents, or about 7 cents higher than analyst consensus.
Wall Street applauded WellCare's results, sending the insurer's stock up 4.2% to $68.82 in late-day trading. However, WellCare's stock is down 1.8% year-to-date. It hit a rough patch in July after it posted a poor second quarter.
WellCare executives said on a call with investors that several headwinds will affect the company going forward. The Tampa, Fla.-based insurer is the largest managed-care organization in Florida's Medicaid program. WellCare has an $11.8 billion contract with the state through 2018 to provide health benefits for low-income residents, but it has struggled with containing medical costs, including the high costs of hepatitis C drugs.
“We still have ways to go to get the business to an acceptable margin,” CEO David Gallitano told investors.
Rising costs also have plagued WellCare's Medicare Advantage business. In the third quarter, the medical-loss ratio for WellCare's Medicare plans was 90.7%, up from 84.9% in the same period a year ago.
Another jolt involved the health insurer fee. The Patient Protection and Affordable Care Act levies a tax, called the health insurer fee, on all private payers to help fund the law. This year, that fee cost WellCare $137.7 million. Next year, WellCare expects the fee will increase by $100 million, which executives called a “pretty substantial headwind.”
In an executive move, WellCare said Wednesday that Chief Financial Officer Thomas Tran will resign from the company, effective Nov. 14. Andrew Asher, who joined WellCare this August as a senior vice president, will take over as CFO. Asher, 46, will earn a $500,000 base salary, bonuses, stock options and a $250,000 signing bonus.
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