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WellCare Faces Lawsuits, Calls To End Enrollment

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By CAROL GENTRY, The Tampa Tribune

Published: October 31, 2007

Previous Coverage:
10/30/07: State Halts Expansion Of Troubled WellCare
10/27/07: Investors Continue WellCare Exodus
10/26/07: WellCare Stock Plunges In Wake Of Raid
10/25/07: FBI Agents Raid WellCare

TAMPA - As its share price continued to slide, WellCare Health Plans dealt Tuesday with a flurry of other problems, led by a halt to its expansion plans in Florida.

It was the sixth day since a coordinated raid by federal and state agents on the Tampa headquarters of the insurer, which has 2.3 million members in its drug and HMO-style plans - all of them Medicare and Medicaid beneficiaries.

None of the agencies involved in the investigation has said what they were looking for that day, or why. Neither has the company. But that doesn't halt speculation, or the rush to the courthouse.

On Tuesday, a New Jersey investor filed suit in Tampa - at least the fourth federal case so far - that accuses the officers and directors of falsely inflating financial results to promote a run-up in the stock price, and then cashing in on their stock options to become millionaires.

The suit, Rosky v. Farha, names every current member of the board except former Sen. Bob Graham. He has been on the board only a short time and was not at last week's quarterly meeting, which was interrupted by 200 agents from the FBI, state Medicaid fraud unit and Medicare inspector general's office. Todd Farha is WellCare's chairman and chief executive officer.

WellCare filed a form with the Securities and Exchange Commission on Tuesday afternoon saying that the investor who sued lacks standing to pursue the case. The statement did not address the accusations of financial misstatements or unjust enrichment.

A more immediate problem for WellCare cropped up Monday night when the Agency for Health Care Administration said it was placing a hold on the company's request for expansion in the state, pending the outcome of the investigation. AHCA provided details on the expansion plans Tuesday, releasing letters that outlined the company's requests.

WellCare had asked to begin enrolling Medicaid beneficiaries in an additional 11 counties in Florida.

Already the largest Medicaid contractor in Florida, WellCare subsidiaries Staywell and Healthease had planned to begin enrolling low-income people in Citrus, Lake and Hendry counties on Dec. 1 and in Hernando and Sumter counties Jan. 1. Healthease planned to move into five counties in North Florida and Indian River County on the Atlantic coast in coming months.

Currently WellCare has Medicaid permission to operate in 34 counties in Florida.

WellCare also sought permission to expand its enrollment in Duval County, where the state is conducting a Medicaid Reform project, from a maximum of 3,500 to 6,000 people. That action, too, is on hold.

In announcing the moratorium on WellCare's expansion Monday night, AHCA Secretary Andrew Agwunobi said in a release that he was taking 'precautionary measures.' He asked that beneficiaries and health care providers call 1-888-419-3456 if they had concerns about any Medicaid managed-care plan.

The release also said the agency's inspector general and Medicaid director would review the state's managed-care contracting policies to see whether they needed strengthening. AHCA spokesman Doc Kokol said Tuesday that this, too, was merely a precaution, that there was no reason to assume that the questions about WellCare had anything to do with its contract.

Meanwhile, about 2,000 miles north of the company's base, the leader of a consumer group called on federal Medicare officials to stop automatically assigning low-income beneficiaries into WellCare drug and HMO plans across the country until the unspecified allegations of financial impropriety are resolved.

'This is something that's pressing for both beneficiaries and taxpayers,' said Judith Stein of Willimantic, Conn., executive director of the non-profit Washington-based group Center for Medicare Advocacy. WellCare received more than $4 billion from taxpayers last year.

The people about whom Stein is concerned are low-income Medicare beneficiaries who are assigned to a drug plan when they don't select one on their own. Of the 1.1 million WellCare members from Medicare, about 452,000 arrived at the company through auto-enrollment, according to the Centers for Medicare and Medicaid Services. CMS calls the process 'auto-facilitation.'

About 38,000 of the auto-enrolled Medicare beneficiaries live in Florida, according to CMS data. Florida's Medicaid program also uses auto-enrollment for many in the state program for low-income families.

Stein says it doesn't make sense for CMS to add more money to the hundreds of millions of dollars it sends the company each month while its own inspector general and others are investigating how the money is used.

CMS had no immediate response to Stein's request.

Both Florida and Georgia Medicaid programs - WellCare's two largest customers - also auto-enroll. A Florida consumer group, Community Health Action Information Network, said Medicaid should halt auto-assignment pending the outcome of the investigation, but spokesmen for both state Medicaid plans said they have no plans to do so.

On Tuesday, the company's stock continued its slide, falling $6.58, or 23 percent, to $22.04. The shares had reached above $120 last week but plummeted after the Oct. 24 raid by federal and state officials.

Reporter Carol Gentry can be reached at cgentry@tampatrib.com or (813) 259-7624.

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