By Zeba Siddiqui
Feb 13 (Reuters) - Managed care provider Wellcare Health
Plans Inc's fourth-quarter profit edged past analysts'
estimates on growth in its Kentucky Medicaid health plan that
previously dragged on the results of several insurers.
The company's shares jumped 12 percent to a four-month high
of $16.64 in early trading on the Nasdaq.
Wellcare on Wednesday said it was able to increase its
premium by about 7 percent in Kentucky since January under an
amendment of its health plan in the region.
This rate increase could help the company turn a profit in
Kentucky, Citi and Wedbush analysts said.
Kentucky has been a sore spot for Wellcare and other
insurers such as Centene Corp as medical costs in the
region have outstripped premium revenue over the last few
quarters, eating into profit margins.
Centene said earlier this month that it would exit the
Kentucky market by July.
Wellcare said total membership rose 4 percent to 2.7 million
at the end of December, helped by its Kentucky health plan and
the recent acquisition of Easy Choice Health Plan, which serves
Southern California markets.
While Medicaid claims in Kentucky were about 97 percent of
premium revenue in the fourth quarter, the number has been
falling, highlighting Wellcare's ability to manage medical
expenses, Wedbush Securities analyst Sarah James said.
CONSERVATIVE OUTLOOK
Wellcare's net income fell to $48.8 million, or $1.11 per
share, in the quarter ended Dec. 31, from $85.1 million, or
$1.96 per share, a year earlier. On an adjusted basis, it earned
$1.32 per share.
Analysts expected fourth-quarter earnings of $1.31 per
share, according to Thomson Reuters I/B/E/S.
Premium revenue jumped 24 percent to $2 billion.
Some analysts said fourth-quarter results were much better
than the most recent expectations.
Wellcare was expected to earn about $1.16 per share in the
quarter, according to Thomson Reuters Starmine's SmartEstimates,
which accords greater weight to recent forecasts from
historically more accurate analysts.
Barclays analysts called the quarter "a solid starting
point," saying the company had made major progress on the
biggest area of concern -- Kentucky Medicaid.
Wellcare now expects adjusted profit for the full year to be
between $4.50 per share and $4.85 per share on premium revenue
of $8.7 billion to $8.8 billion.
Analysts on average were expecting earnings of $4.97 per
share, according to Thomson Reuters I/B/E/S.
"The outlook looks conservative to me, given the size of the
rate increase in Kentucky," Wedbush's James said.
"There's also a high level of investment spend in there that
is going to fuel future growth."
(Correction: An earlier version of this story referenced Molina
Healthcare with regards to Kentucky. Molina
does not have a presence in the state.)
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