Taxpayers Good to WellCare, Humana

May 7, 2014

Taxpayers have been good to Tampa-based WellCare Health Plans Inc., and they're about to get even more generous. 

In WellCare's case, the benefactor is Medicaid. But Humana, another company that is big in Florida and is releasing earnings, apparently is benefiting from enrollment through the Affordable Care Act, as Forbes reports.

WellCare, which released its first-quarter earnings report on Tuesday, already has 3.5 million members nationwide, a one-year growth of 31 percent, through a combination of state and federal Medicaid and Medicare contracts.  The company predicted its revenue this year will be $12 billion.

Florida is particularly good to WellCare, the reports show. Stock analysts predict that Medicaid enrollment in this state could jump 200 to 400 percent this year -- to 500,000 or even 750,000 -- with the rollout of the statewide managed-care program. WellCare has for many years been the largest vendor for Florida Medicaid.

Another way taxpayers have graced WellCare: Five states, including Florida, have agreed to pay 80 percent of the company's assessed fee under the Affordable Care Act, and negotiations are still going on with four others, said CITI analyst Carl McDonald. (One of the sources of funding for the health law was a tax on health plans, given their expected increase in membership under ACA.)

The states that have agreed to contribute to cover the industry fee for WellCare's Medicaid plans are Florida, Georgia, Kentucky, Missouri and South Carolina. Discussions continue with Hawaii, Illinois, New York and Ohio, McDonald said.

Wellcare's stock price, which jumped above $70 a share Tuesday when the company's first-quarter earnings were released, settled back this morning to just under $68 a share, about $2 above where it was Monday. Price targets for the year shot up; McDonald predicts it will reach $78 and Tom Carroll of Stifel predicts $85. 

On May 1, Florida launched a four-month rollout for statewide Medicaid managed care, which involves moving almost all of its more than 3 million recipients into private plans. In the world of publicly-traded HMOs, it is a spectacular business opportunity.

In the first quarter, WellCare reported that its adjusted per-share profit jumped from 63 cents to $1.13, "blowing earnings estimates of 4 cents per share out of the water," as the Motley Fool put it.

Chairman and Interim CEO David Gallitano told analysts the company will probably take several more months to fill the company's top executive position.  He has been filling in as CEO since Alec Cunningham left late last year.