Insurer WellCare Health Plans caught a bad case of the flu in the final quarter of 2014 and saw a precipitous decline in earnings as a result.
Net income in WellCare's fourth quarter dropped 82% to $7.7 million from $42.9 million in the same quarter of 2013, equating to a razor-thin 0.2% margin. This winter's severe flu season led to $15.1 million in medical costs above the seasonal average, the company said.
WellCare is one of the only managed-care insurers that has said flu-related costs dragged down fourth-quarter profit. Heightened flu activity impacted Humana, the insurer said this month. But Humana still turned a year-over-year profit.
Even after accounting for the flu, which hit WellCare's Medicaid members most severely, the company's fourth-quarter profit was lower than many analysts expected.
WellCare, which mostly operates Medicare and Medicare plans, closed 2014 with a $63.7 million profit, down 64% from 2013. Revenue soared 36% to $13 billion as membership increased. WellCare had 2.3 million Medicaid enrollees and 417,000 Medicare customers as of Dec. 31, up 31% and 44% respectively from the end of 2013. Including Medicare prescription drug plans, WellCare has more than 4.1 million members.
Tampa, Fla.-based WellCare overhauled its executive team over the past several months in the hopes of reversing the company's struggles. Kenneth Burdick took over as CEO in January, and Andrew Asher became chief financial officer in November.
Burdick expects revenue from health plan premiums of between $13.5 billion and $13.8 billion this year, which would be a 6% growth rate at the high end. That pales in comparison to other similarly sized publicly traded insurers. Health Net, for example, said Tuesday that its 2015 revenue is expected to be 23% higher. Humana expects revenue to grow more than 13% this year.
“It would be hard to argue that WellCare is as well-positioned, or growing as fast as those peers,” Barclays Research analyst Josh Raskin said in a note to investors.
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