WellCare suspension about to lift?
By Carol Gentry
9/18/2009 © Health News Florida
Even though WellCare Health Plans is still under federal sanctions barring it from marketing or selling its drug and HMO plans to Medicare beneficiaries, the Tampa-based insurer is advertising for sales people, indicating it thinks the suspension will soon be history.
WellCare spokeswoman Amy Knapp said the company can't comment on that beyond saying, "It's completely up to (the government) as to when sanctions will be lifted."
The flier seeks “benefit consultants”— a euphemism for sales staff, judging from the duties listed – for Medicare Advantage plans in several markets in Florida. It brags “very few companies are fortunate to experience such explosive growth!”
Actually, the growth has been stalled, at least on the Medicare side, since March 7. That's when the Centers for Medicare and Medicaid Services (CMS) suspended WellCare, saying the number of complaints about administrative hassles was among the highest of any in the country. (Citrus Health Care, another Tampa-based HMO with government contracts, was also suspended, but CMS' concern with Citrus lay in its finances.)
Both remain under Medicare suspension, CMS spokesman Peter Ashkenaz said Thursday.
WellCare and Citrus have been allowed to continue enrolling Medicaid recipients in Florida, since states make the rules on Medicaid even though most of the funding is federal. Medicaid programs account for almost two-thirds of WellCare's earnings.
Still, Medicare has been lucrative, several analysts have said in recent notes to investors. Their reading of the Senate Finance Committee bill and conversations with political analysts have convinced them it will remain so under health reform after a one-year trim.
It's vital for any company that sells Medicare drug and HMO plans to be free of sanctions when Medicare's open-enrollment season begins Nov. 15. It would be better still, from WellCare's point of view, to be out from under the restrictions by Oct. 1, when marketing can begin.
Goldman Sachs analysts who spoke with WellCare's top executives last month and then issued a strong "buy" rating wrote that the Tampa-based company clearly believes it will be reinstated shortly.
"It can't come early enough," Oppenheimer's Randi Roberts wrote Thursday. The company needs to grow its Medicare HMO book "or at least refresh it with younger, healthier seniors."
Wellcare’s Medicare Advantage membership peaked in April -- the month after the suspension went into effect -- at just under 270,000, she wrote, but has since fallen by 24,000, a drop of 9 percent. Most are in HMOs; the company is phasing out a looser non-network plan called private fee-for-service by the end of the year.
While it has not made any public statements about the matter, WellCare posted a filing with the Securities and Exchange Commission this week saying that CMS has renewed its prescription-drug plan contract. The SEC filing also noted that WellCare received a renewal of its three-year contract with Florida Medicaid from the Agency for Health Care Administration. WellCare has Medicaid enrollees in several states; Florida is the largest.
CMS spokesman Ashkenaz said the renewal of the contract doesn't mean the sanctions have been lifted; such renewals are "standard procedure," he said. Medicare beneficiaries who signed up before the suspension began were not affected.
"We have never stated we intend to non-renew or terminate (WellCare's) contract," Ashkenaz said in an e-mail. "However," he said, "they are also are still under sanction" on marketing and enrolling new members.
The suspension is unrelated to the charges of Medicaid fraud that were brought by the U.S. Justice Department and Florida Attorney General earlier this year following an investigation that exploded into public view in October 2007 with an FBI raid on WellCare's Tampa headquarters. The company was able to avoid criminal prosecution by settling the case with restitution and penalties totaling $80 million. It has headed off trouble with the SEC with a $10 million settlement and has a another $40 million put aside to deal with civil penalties. It also still faces a shareholder suit, but analysts aren't worried.
"The company has adequate unregulated cash to meet operational needs as well as legal settlements without raising additional capital," Goldman Sachs' Daryn Miller and Matthew Borsch wrote in May. At the time they said WellCare had $1.4 billion in total cash and investments.
Goldman Sachs rated WellCare as the health-care company most likely to be taken over by a larger insurer, which has led to a great deal of futures trading on the projected stock price. The companies that need to diversity into Medicaid and thus are most likely to be interested in such an acquisition, the analysts said, are Aetna and UnitedHealth Group. Neither WellCare nor the other companies has been willing to discuss it, as is traditional in possible mergers and acquisitions.
Part of the M&A talk has arisen from WellCare's appointment of Charles Berg as executive chairman. Berg has experience in getting a mid-sized HMO plumped up and ready for sale. He did it before with Oxford Health Plan.
--Carol Gentry, Editor, can be reached at 727-410-3266 or by e-mail.