WellCare's profit jumps on Medicare membership, lower Medicaid costs
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Tampa, Fla.-based insurance company WellCare Health Plans' first-quarter 2018 profit soared as it kept Medicaid costs low and grew membership in Medicare Advantage plans in the wake of its 2017 acquisition of Advantage insurer Universal American Corp.
WellCare has long been a major presence in Medicaid managed care, but recently has turned its focus to growing its Medicare Advantage footprint and improving the quality of those plans. The privatized version of Medicare represents a lucrative opportunity for health insurers, as the baby boomer generation ages into the program at a rapid clip.
To gain a larger stronghold in the space, WellCare bought Universal American for $800 million last year. The deal, which closed in April 2017, added about 119,000 Advantage members in Texas, New York and Maine to WellCare plans and helped bring the insurer's total Advantage membership to 506,000 at the end of the first quarter, up 42.1% over the same period a year ago. The deal also helped boost the portion of WellCare's members in plans rated four stars by the CMS to almost 40%. However, membership in its Medicare prescription drug plans decreased 2.4% to 1.1 million.
Medicare plan premiums grew by 42.2% to $1.6 billion in the first quarter. Advantage plans now represent about a third of the insurer's total revenue.
Across the entire company, WellCare's net income totaled $101.7 million in the first quarter of 2018, up 51.1% from $67.3 million during the same quarter 2017. Its revenue grew 17.5% to $4.6 billion year over year.
Despite growth in the Medicare business, WellCare's Medicaid plans still represent the bulk of its revenue. Medicaid membership grew to 2.7 million, an up 3.1% over the same period a year ago, as WellCare added new members in Missouri and Arizona. That helped boost Medicaid revenue to $2.8 billion in the quarter, up 8.7% year over year.
WellCare said lower costs in its Medicaid and Medicare prescription drug plans helped drive profit in the first quarter. The lower tax rate resulting from the Trump administration's corporate tax overhaul also padded the bottom line.
WellCare's medical loss ratio—the portion of premiums used to pay medical claims and improve quality—dropped to 85.6% in the quarter compared with 88.1% in the first quarter of 2017. The lower the ratio, the better for the insurer.
WellCare's total membership was 4.3 million as of March 31, up 5.1% over 4.1 million at the same time a year ago.
"We entered 2018 with strong momentum, and our 2018 first-quarter results reflect continued strong execution," WellCare CEO Ken Burdick said in a statement. "All lines of business produced strong earnings results during the quarter."
He added that WellCare was recently selected to keep serving Medicaid members in Florida, Arizona and Hawaii.
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