TAMPA, Fla. (AP) -- WellCare Health Plans Inc. chopped its 2012 earnings forecast on Wednesday and reported a 57 percent drop in third-quarter net income as the Medicaid coverage provider took a premium hit in Georgia, and high costs hurt its Kentucky operation.
The Tampa, Fla., company's performance fell well short of analysts' expectations, and its stock dropped Wednesday before trading began.
WellCare recorded an $18 million premium reduction in Georgia due to an unanticipated partial disallowance by federal regulators of a 2011 settlement. The insurer's costs also jumped.
The portion of premium revenue that WellCare spent on claims for its Medicaid business climbed past 91 percent from about 80 percent in last year's quarter, mainly due to the Kentucky business. But WellCare expects its performance there to improve thanks to a premium rate hike and medical expense management.
Overall the insurer made $38.3 million, or 87 cents per share, in the three months that ended Sept. 30. That compares to earnings of $88.3 million, or $2.03 per share, in last year's quarter. Adjusted earnings, which exclude one-time items, came in at $1.05 per share.
Revenue climbed 18 percent to $1.82 billion.
Analysts expected, on average, earnings of $1.46 per share on $1.83 billion in revenue, according to FactSet.
WellCare shares fell nearly 7 percent, or $3.83, to $51.40 in morning trading.
WellCare mostly administers the state and federally funded Medicaid program, which provides coverage for poor and disabled people. It also sells Medicare prescription drug coverage and Medicare Advantage plans, which are privately run versions of the government's Medicare program for elderly and disabled people.
Total medical membership, counting prescription drug coverage, climbed more than 6 percent in the quarter to nearly 2.6 million people. WellCare's medical benefits, its largest expense, also jumped 28 percent to $1.55 billion.
The insurer now expects 2012 adjusted earnings of $4.90 to $5.05 per share, down from its previous forecast of $5.25 to $5.45 per share. It expects 2012 premium revenue of about $7.15 billion to $7.2 billion, up from an earlier prediction for $7.1 billion.
Analysts expected, on average, earnings of $5.39 per share on about $7.24 billion in revenue.
WellCare also said Wednesday that it will buy UnitedHealth Group Inc.'s South Carolina Medicaid business, which serves about 65,000 people. Terms of the deal were not disclosed.