WellCare posted a second-quarter turnaround of almost $60 million after the Tampa, Fla.-based health insurer secured state Medicaid contracts and lowered the costs of its Medicare Part D drug plans.
Investors cheered WellCare's work of revamping its operations, driving up shares by more than 11% to $89.31 by late afternoon trading. WellCare's shares are up about 7.8% so far this year.
WellCare has struggled the past two years with stagnant health plan growth. The insurer predominantly treats Medicare and Medicaid populations, giving it little room for error to keep a profit.
The company has also struggled with the stain of an executive criminal fraud case, which has cost almost $200 million in legal expenses. Kenneth Burdick was named CEO of WellCare this year to turn the ship around. He was the chief of Blue Cross and Blue Shield of Minnesota before joining WellCare.
Burdick said in an earnings call Wednesday that WellCare has “plenty of work to do” but is on track to meet financial goals. “We are in a much stronger position than we were a year ago,” he said. “Our associates are focused on executing and delivering consistent results as we position the company for the long term.”
WellCare posted a $51.7 million profit in the second quarter compared with a $7.5 million loss in the same period of 2014. Revenue jumped 10.5% to $3.5 billion.
WellCare won its rebid as a managed-care company for Kentucky's Medicaid program, which analysts viewed as essential and was one of the company's primary goals for this year. That state accounted for 28% of the WellCare's total Medicaid revenue in the quarter. WellCare also won Medicaid contracts with New York and Florida's Healthy Kids program.
It is still waiting to hear back on Georgia's managed Medicaid program, which covers 1.3 million people. Georgia expects to announce the winners in September.
Most of WellCare's profit improvement in the second quarter came from its Medicare Part D products, which cover prescription drug benefits. WellCare spent 79.2% of its Part D premiums on drug costs, a vast drop from the 92.6% ratio it recorded in the same period a year ago.
WellCare Chief Financial Officer Andrew Asher said the company took “a more balanced approach” in how it priced the Part D plans for 2015. Starting next year, WellCare is partnering with CVS Health as its new pharmacy benefits manager, which executives believe can further drive down drug costs through negotiations with drugmakers.