NEW YORK — Shares of WellCare Health Plans Inc. of Tampa plunged to all-time lows Thursday after the health insurer, already the target of multiple state and federal investigations, said it is in default on some debt covenants and is being hurt by higher Medicare costs.
In a filing with the Securities and Exchange Commission, WellCare said it is in default on a loan facility with a balance of $153.2-million.
It also reported that its medical benefits ratio — a measure of how many premium dollars were spent on providing care — was 2 to 4 percent higher for the first nine months of 2008 than in the same period in 2007. It added the weakened economy could hurt its results for the year because of rising expenses and potential changes in rates and eligibility.
Shares sank $10.77, or 54.2 percent, to close at $9.10. Earlier Thursday they had fallen to $6.12. The stock was already trading near all-time lows and set an annual minimum of $19.71 Wednesday.
Spokeswoman Amy Knapp wouldn't comment on whether the company was facing more layoffs after it let go about 5 percent of its workforce, eliminating 208 jobs, in May.
"It's not appropriate for me to comment on any rumors or speculations," Knapp said. "We're committed to the community, we're committed to our members, and we're committed to our clients."
She added that the company is growing, enrolling members and renewing contracts with government programs.
But that apparently didn't outweigh the bad news for investors on Thursday.
WellCare disclosed it is in default on one loan, due May 13, 2009 The turmoil in the credit markets over the last few months has made it more difficult for WellCare to obtain cash, but the company said it is pursuing alternatives so it can pay debts and raise additional money.
However, the company noted it may not be able to obtain financing, and said if it does, the costs are likely to be high and the terms burdensome.
WellCare has not filed a quarterly report since October 2007, when an FBI raid kicked off an investigation by the Justice Department, Federal Bureau of Investigation, Department of Health and Human Services' Office of Inspector General and Florida's U.S. Attorney's office.
The Securities and Exchange Commission also is conducting an informal inquiry, and the company is investigating itself.
Before the raid, its stock was trading at more than $120 a share. Since then, the company has struggled to recover as investors learned more about what brought the business down.
It cleaned house in January, ousting its top three executives and bringing in two veterans of the managed-care business.
In its own investigation, WellCare concluded it overcharged the states of Florida and Illinois for three health businesses.
The company has said it will pay $35.2-million as part of an agreement with prosecutors. But that doesn't settle the case or limit the U.S. government and state of Florida from making further claims in their investigation.
On Wednesday, the company said the third quarter included about $23-million in costs related to its internal investigation and the various government investigations into its business. Those costs are $87-million for the year to date.