WellCare Health Dropping Medicare Advantage Fee-for-Service Next Year

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May 5, 2009 Tuesday 02:17 PM EST

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WellCare Health Dropping Medicare Advantage Fee-for-Service Next Year

Fran Lysiak

TAMPA, Fla.

WellCare Health Plans Inc. has told the U.S. Centers for Medicare and Medicaid Services that it doesn't plan to renew its contracts to sell Medicare Advantage private fee-for-service plans to seniors next year.

About 110,000 seniors are enrolled in its private fee-for-service plans and they will continue to have access to their benefits until Jan. 1, 2010, WellCare said.

"Our intention to withdraw from Medicare Advantage PFFS was a difficult decision, and we regret that in 2010 we will no longer be able to offer these plans," said Heath Schiesser, WellCare's president and chief executive officer, in a statement.

Carl McDonald, an equity analyst with Oppenheimer & Co., wrote in a research note that "it isn't all that often that you see a plan walk away from a profitable business...but several factors unique to WellCare, along with the big Medicare rate cut planned next year, probably forced the company's hand."

The Tampa, Fla.-based WellCare (NYSE: WCG), with about 2.5 million members in the United States, provides managed-care services exclusively for government-sponsored health insurance programs such as Medicare and Medicaid.

Private Medicare Advantage plans, which include HMOs and PPOs, offer seniors coverage for physician care, hospital services and prescription drugs, and may include coverage for dental, vision and hearing. But they may be more expensive than the government's original, fee-for-service Medicare if beneficiaries get care outside their plan's provider network.

MA private fee-for-service plans are similar to original Medicare because seniors can visit almost any doctor or hospital and the plan will cover the care.

However, President Barack Obama and many congressional Democrats want to bring reimbursement in line with 100% of the government's original Medicare program. White House Budget Director Peter Orszag has estimated Medicare Advantage plans are paid $1,000 more per beneficiary than the cost of serving the same beneficiary under original Medicare (BestWire, April 7, 2009).

Under reimbursement guidelines CMS released last month, health insurers participating in the Medicare Advantage program in 2010 will be asked for the first time to accept lower payments than the prior year. The cuts are drawing deep disappointment from participating companies for whom the Medicare Advantage market has proved a steady source of growth in recent years (BestWire, April 7, 2009).

WellCare said seniors in its private fee-for-service plans will be able to pick another Medicare Advantage plan, or return to original Medicare coverage during the annual election period starting this fall. The company will continue to serve members through its Medicare Advantage HMO and stand-alone prescription drug plans.

Last summer, BestWire reported that some health insurers may try converting their private-fee-for-service plans to Medicare Advantage PPOs because of billions in reimbursement cuts enacted by Congress, which wanted to avert reimbursement cuts to physicians. Starting in 2011, private fee-for-service plans will essentially will be gone, experts said (BestWire, Aug. 18, 2008).

WellCare is following in the footsteps of Coventry Health Care (NYSE: CVH), which also plans to drop all private fee-for-service plans in 2010, according to McDonald.

Meanwhile, in October 2007, law enforcement personnel with the Federal Bureau of Investigation, the U.S. Department of Health and Human Services/Office of Inspector General, and the Florida Attorney General's Medicaid Fraud Control Unit executed a federal search warrant at company's Tampa headquarters (BestWire, Jan. 29, 2008).

WellCare said its decision to drop Medicare Advantage private-fee-for-service next year isn't related to the investigations and it continues to cooperate with enforcement and regulatory officials in those matters.

WellCare of Florida Inc. currently has a Best's Financial Strength of C++ (Marginal), based on public data.

(By Fran Matso Lysiak, senior associate editor, BestWeek: [email protected])

May 6, 2009