WellCare Health Plans posted higher revenue and added more members in the third quarter of 2018 after closing a deal to buy for-profit insurer Meridian Health Plan last month.
Tampa, Fla.-based WellCare's revenue in the three months ended Sept. 30 jumped 14.9% to $5.1 billion, primarily because of the $2.5 billion Meridian deal.
The deal, first announced in May, boosted WellCare's Medicaid membership in Illinois and Michigan and gave it a foundation to build internal pharmacy management capabilities through Meridian's in-house pharmacy benefit manager.
"We delivered strong operating and financial results in the third quarter," WellCare CEO Ken Burdick said in a statement. "With the recent closing of the Meridian acquisition and our Medicaid contract wins in Florida and Arizona, we are excited about our substantial growth outlook as we move through the end of the year and into 2019."
WellCare's third-quarter top line was also helped by the statewide expansion of the Illinois Medicaid program, Medicare membership growth and the reinstatement of the health insurer tax for 2018, the company said. That tax, which is loathed by the industry, helps boost revenue because health plans pay for the tax by raising insurance premiums.
But WellCare said the reinstatement of the health insurer tax also led to a decrease in net income. WellCare's profit fell 23.9% to $130.6 million in the third quarter because of the tax and "the recognition of certain previously unrecognized tax benefits and incremental retroactive revenue related to Florida during the third quarter of 2017."
The Meridian acquisition boosted WellCare's Medicaid membership to 3.9 million, an increase of 43.7% year over year, and Medicare membership to 544,000, up 10.6%. WellCare said membership in both programs also grew organically during the quarter.
Medicaid membership growth was also helped by the statewide expansion of the Illinois Medicaid program, WellCare said. Revenue from Medicaid plans totaled $3.2 billion for the third quarter, an increase of 18.4%. And Medicare revenue totaled $1.6 billion, up 7.9% over the third quarter of 2017.
Meanwhile, membership in WellCare's Medicare prescription drug plans fell 7.4% to 1.1 million as of Sept. 30 because of the insurer's "2018 bid positioning." Revenue from that business segment decreased 9.7% to $182.3 million as a result.
But WellCare could soon turn its prescription drug plan business around. Last month, it struck a deal to acquire Aetna's entire standalone Medicare Part D prescription drug business, which would triple WellCare's drug plan customers to 3.3 million. The U.S. Justice Department required Aetna to divest its prescription drug plans in order to merge with CVS Health.
In total, WellCare's membership across all its business segments was 5.5 million, an increase of 26.6% year over year. Its medical loss ratio, which represents the amount per premiums spent on medical care and quality improvement, was 84.1% in the third quarter, compared with 85.2% at the same time last year.