Health insurer WellCare Health Plans Inc. restated its results from 2004 into 2007 late Monday, saying it overcharged the states of Illinois and Florida and overstated its profits due to accounting errors.
WellCare said the errors caused it to record inadequate liabilities for anticipated premium funds. Insufficient liabilities were recorded for three businesses: the behavioral health component of WellCare's Medicaid contract with the Florida Agency for Health Care Administration, the "Healthy Kids" contract with Florida Health Kids Corp., and a Medicaid contract with Illinois Department of Health and Family Services.
The "Healthy Kids" program provides insurance for children whose family income leaves them ineligible for Medicaid.
As a result of the errors, WellCare said it owes the states a total of about $46.5 million.
The federal government is investigating WellCare, and agents from the FBI, Department of Health and Human Services and the Medicare fraud division of the Florida Attorney General's office were involved in a raid on the company's Tampa headquarters in late October. A former employee also filed a whistleblower lawsuit against WellCare, the details of which have not been disclosed. WellCare was also the subject of class-action lawsuits.
Analysts have said the initial whistleblower suit may have been connected to the company's Medicaid business, mental health business and reinsurance business in Florida. WellCare said Monday that the complaint remains sealed, and as a result it does not know the nature of the allegations against it.
In a Form 8-K filing with the Securities and Exchange Commission, WellCare created a special audit committee in the wake of the investigations, and it said the committee recommended the company restate its results. A spokeswoman for WellCare referred questions to the filing and said she could not comment further on the reasons for the restatement.
WellCare filed restatements of its results for 2004 through 2006, and the first six months of 2007. The company said it owes a combined refund of about $42 million for 2004 to 2006, which it described as less than 1 percent of restated premium revenue for that period. It expects an additional refund of $4.5 million for 2007.
The company said it included some ineligible medical expenses in calculating its refunds, and as a result, it understated the amount of those refunds. The restatement cuts its earnings per share over that period by about 9 percent.
As a result of the restatements, WellCare said its 2004 profit was reduced to $1.34 per share from $1.56. Its 2005 profit fell to $1.20 per share from $1.32, and its 2006 profit decreased to $3.13 per share from $3.43. For the first half of 2007, its profit dipped to $1.80 per share from $1.90.
In January, WellCare Chief Executive Todd Farha, Chief Financial Officer Paul Behrens and General Counsel Thaddeus Bereday all resigned their positions. In the 8-K filing, WellCare said its former senior management "set an inappropriate tone" with its efforts to comply with Florida regulatory requirements and failed to ensure effective communications with regulators regarding those programs.
WellCare also said some of its premiums should have been recorded as a return of premium revenue instead of medical benefits expenses, and some liabilities should have been reported as other payables to government partners rather than Medical benefits payables. Those changes did not affect its profits.
The Securities and Exchange Commission is also conducting what WellCare described as an informal investigation.
The stock ended Monday trading at $29.23. The day before the raid was conducted, it peaked at $128.42.
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