WellCare Looking Vulnerable

Even if WellCare manages to win over seniors and expand -- or at least maintain -- its MA market share, the company must then officially renew some key contracts with the government. WellCare's federal contracts for many of its Medicare programs, including its popular private fee-for-service plans, expire at the end of December. Moreover, the company's highly profitable Medicaid contracts in the state of New York -- where an investigation is reportedly brewing -- will expire over the course of the next year as well.

WellCare faces serious risks in some other crucial markets, too. Florida, in particular, stands out. Although WellCare's current Medicaid contracts in Florida extend through the summer of 2009, the company's plans to expand its business there have been temporarily halted.

Notably, days after last month's raid, Florida's Medicaid agency delayed WellCare's request to branch out into new service areas across the state. Now, some experts worry about WellCare's ability to hold on to the Florida Medicaid business that it already has.

"The Florida Medicaid market is WellCare's single largest business line, [accounting] for 39% of WellCare's total membership in 2Q07," Deutsche Bank analyst Scott Fidel stressed late last month. Based on recent figures, "WCG held a No. 1 46% market share in Florida Medicaid, followed by Amerigroup (AGP Quote) at 18%, UnitedHealth (UNH Quote) at 12% and Humana (HUM Quote) at 5%.