WellCare Looking Vulnerable

Credit Suisse analyst Gregory Nersessian downgraded WellCare around this same timeframe.

"A large, red flag has effectively been painted on the back of Medicare Advantage plans," Nersessian warned this March. And "we believe the potential for Medicare reimbursement cuts coming out of the current legislative cycle and Medicaid rate pressures are not fully reflected in the company's current stock price."

With WellCare's stock fetching almost $86 at the time -- and poised to rocket even higher -- Nersessian established a more conservative price target of $80 a share. Since then, with risks to both of WellCare's core businesses mounting, Nersenssian has further slashed his target by another $30. His firm makes a market in the company's securities.

Outsized Profits

Back in its glory days, as its stock headed toward $130 a share, WellCare may have been even more profitable than it seemed.

For more than a year, Goldman Sachs analyst Matthew Borsch has been suggesting that WellCare shifts huge sums of money into an offshore subsidiary so that the company looks less profitable when it seeks rate increases from Medicaid officials. Late last month, Borsch followed up by saying that this arrangement has in fact cut WellCare's reported profits by nearly half. Even before then, Borsch reported that regulators in both Florida and Connecticut were scrutinizing the transactions.