WellCare Health Plans, Inc. (NYSE: WCG) today reported results for the year and fourth quarter ended December 31, 2009. As determined under generally accepted accounting principles (“GAAP”), the Company reported net income of $39.9 million, or $0.95 per diluted share, for the year 2009, compared with a net loss of $36.8 million, or $0.89 per diluted share, for the year 2008. Adjusted net income for the year 2009 was $126.6 million, or $3.00 per diluted share, as compared with $133.2 million, or $3.17 per diluted share, for the year 2008.
“We accomplished a number of important objectives during 2009”
Adjusted net income for 2009 was unfavorable to 2008 primarily due to the increase in the Medicaid segment medical benefits ratio (“MBR”) as a result of premium rate changes below medical cost trend and the addition of the Company’s Hawaii aged, blind, and disabled (“ABD”) program; the performance of Medicare Prescription Drug Plans (“PDPs”) and Medicare Advantage private fee-for-service plans; and significantly lower investment and other income. Partially offsetting these unfavorable results were the performance of Medicare Advantage coordinated care plans; growth in membership and premium revenue in the Company’s Medicaid plans; and decreased selling, general, and administrative (“SG&A”) expense resulting mainly from lower sales and marketing costs and improved operating efficiencies.
“We accomplished a number of important objectives during 2009,” said Alec Cunningham, WellCare’s chief executive officer. “From a financial perspective, 2010 will be a challenging year, as we absorb the impact of last year’s private fee-for-service plans withdrawal and the CMS marketing sanction. Nevertheless, we are focused on our three longer-term priorities of improved health care quality and access, a competitive cost structure, and profitable growth through serving our members, government clients, and providers effectively.”
In addition to results determined under GAAP, net income and certain other operating results described in this news release have been adjusted for certain medical benefits and SG&A expenses, primarily related to previously disclosed government investigations, that management believes are not indicative of long-term business operations. Please refer to the schedules in this news release that provide supplemental information reconciling results determined under GAAP to adjusted results.
Highlights of Operations for the Fourth Quarter
As determined under GAAP, the Company reported net income of $11.1 million, or $0.26 per diluted share, for the fourth quarter 2009, compared with a net loss of $31.1 million, or $0.75 per diluted share, for the fourth quarter 2008. Adjusted net income for the fourth quarter 2009 was $20.0 million, or $0.47 per diluted share, as compared with $27.8 million, or $0.66 per diluted share, for the fourth quarter 2008.
Adjusted net income for the fourth quarter 2009 was unfavorable to the fourth quarter 2008 primarily due to the increase in the Medicaid segment MBR as a result of premium rate changes below medical cost trend and the addition of the Hawaii ABD program, as well as the performance of Medicare PDPs and Medicare Advantage private fee-for-service plans. Partially offsetting those factors were decreased SG&A expense, resulting mainly from lower sales and marketing costs, and the growth in membership and premium revenue in the Company’s Medicaid plans.
Membership as of December 31, 2009, decreased to 2.3 million compared with 2.5 million members as of December 31, 2008. Medicaid segment membership increased 3.8% year-over-year to 1.3 million, driven by growth in several markets and the February 2009 addition of the Hawaii ABD program. Year-over-year, Medicare Advantage membership decreased 8.5%, principally as a result of the CMS marketing sanction. Medicare stand-alone PDP membership decreased 24.2% compared with December 31, 2008, due largely to 2009 bid results and, less significantly, the CMS sanction.
Premium revenue for the fourth quarter 2009 increased 1.6% year-over-year to $1.6 billion. The growth is attributable to increased Medicaid plan premium revenue, offset in part by the decreases in Medicare Advantage and Medicare PDP premium revenue.