WellCare Swings to Loss Amid Fraud Scandal

A prolonged scandal in which a health insurer is accused of defrauding children and the poor apparently is not good for its quarterly earnings. Such, at least, is the case with WellCare(WCG Quote), whose profits continued to be weighed down in the first quarter by an ongoing scandal.

The health insurance provider recorded a loss of $36.9 million, or 89 cents a share, compared with a profit of $1.3 million, or 3 cents, a year ago.

The news sent shares down 7% to $18.84 in afternoon trading.

Excluding costs related to investigations, WellCare said earnings were $12.3 million, or 29 cents a share in the first quarter. Analysts expected earnings of 18 cents.

Revenue rose 10% to $1.8 billion from $1.64 billion on higher premiums.

WellCare last week agreed to pay $80 million to avoid criminal prosecution for health care fraud. The Tampa-based company has been charged with engaging in an elaborate scheme to defraud the Florida Medicaid program and Florida Healthy Kids Corporation of about $40 million.

But the investigation is not over, and executives and employees could still be charged. As a result, the company refused to provide full-year outlook.

WellCare has been under government investigation since October 2007 and restated its results from 2004 to 2007.