Wellcare Under Review for Downgrade

TheStreet.com Ratings has put the financial strength rating of Wellcare(WCG Quote) and its subsidiaries under review for a possible downgrade following a government raid of its Florida offices last week.

The company, which supplies health insurance coverage exclusively to Medicare and Medicaid recipients, is under investigation for fraud by the Federal Bureau of Investigation and the Medicaid fraud unit for the state of Florida, among others.

While the financial impact is unclear, the raid couldn't come at a worse time for the company.

Open enrollment for Medicare's prescription drug plan is set to start Nov. 15 and ends the first of the year.

During this period, newly eligible seniors will be allowed to select a plan and, more importantly, existing Medicare recipients can choose to switch to another provider.

With just two weeks to go and little information regarding the investigation, Florida affiliate Wellcare Prescription Insurance could suffer significant withdrawals.

The company offers stand-alone prescription drug plans to nearly 1 million members, all of whom have been enrolled since its inception in January 2006.

Second-quarter financial filings indicate that nearly half of the company's $2.5 billion in revenue is sourced from the Medicare line of business.

TheStreet.com Ratings looks at the financial strength of health insurers using a quantitative model to assign ratings from "A" to "E."

The analysis is based on each insurer's financial performance, including an analysis of profitability, liquidity, stability and capitalization.

The current ratings of the various Wellcare entities can be found in the table below.

Note that the "C" (fair) rating of Wellcare Prescription Insurance already reflects TheStreet.com Ratings' concern regarding the stability of this company, despite the stronger financial health of Wellcare of Florida.

Affiliate Name	Financial Strength Rating	Total Assets (Millions)	Medicaid Enrollment	Medicare Enrollment
Wellcare Prescription Ins Inc (FL)	C	$597.50		966,099*
Wellcare of Florida Inc	B	$336.40	175,560	66,509
Wellcare of Georgia Inc	U	$166.20	447,717	1,813
Healthease of Florida Inc	B-	$156.30	200,346
Wellcare of New York Inc	B	$138.00	63,124	17,689
Harmony Health Plan of Illinois Inc	C+	$73.20	102,748	7,238
Wellcare Health Ins of Arizona Inc	U	$59.90		17,454
Wellcare of Ohio Inc	U	$38.70	28,691
Wellcare of Connecticut Inc	C	$26.70	36,348	2,878
Wellcare of Louisiana Inc	C	$15.00		3,177
Wellcare Health Ins of New York Inc	U	$8.80		888
Financial and enrollment figures sourced from 3/31/07 Health insurance statutory filings. Rating Definitions: A = Excellent, B= Good, C= Fair, D=Weak, E=Very Weak, U = Unrated (may be unrated due to lack of sufficient information to issue a rating) * Enrollment is categorized as 'Other' in statutory filings as is deemed appropriate for stand-alone Medicare PDP products.