Medicare Map Favors Aetna

"You simply cannot entirely explain the low average bids in many states by their concentration of seniors and/or drug utilization patterns," Hojlo wrote. "Any way you look at it ... it appears to us that certain regions at the low end of the reimbursement spectrum are unlikely to be as profitable as some health plans had hoped."

Besides PacifiCare, at least two other regional companies -- Health Net (HNT Quote) and Molina Healthcare (MOH Quote) -- face California exposure. But Hojlo ultimately believes that larger players there, including market leader WellPoint, could be spared.

"Given their size, the large national health plans should not be significantly impacted by aggressive bidding in a few markets," he wrote. "Furthermore, the large plans will probably outlast the smaller, less savvy competitors who are, in some instances, likely to bid themselves out of the Part D business."

Vegas Gamble

Hojlo specifically highlighted Sierra -- which caters to the Las Vegas crowd -- as a potentially vulnerable candidate.

He said that Nevada, home to Sierra's major market, came in with the second-lowest Medicare bids of all. Moreover, he said, the state lacks both the high senior population and the drug utilization rate that would make those bids make sense. Instead, he suggested, companies seemed to be looking at the state's high growth rate and its close proximity to California -- potentially the real area of interest -- when placing their aggressive bids.

Sierra shares slipped 38 cents to $67.57 Wednesday.

Due to a combination of factors, Hojlo actually identified Ohio as the most problematic Medicare market of all. Specifically, he said, Ohio features the nation's sixth-largest Medicare population and "very high" prescription drug use trends. Even so, he said, companies there still submitted bids that came in lower than the national average.

"Granted, (Ohio's) size suggests a market opportunity and economies of scale that might justify lower pricing," he wrote. "But the state's high drug utilization patterns would seem to more than trump this."