WELLCARE REPORTS FOURTH QUARTER AND YEAR-END 2014 RESULTS - PROVIDES 2015 GUIDANCE

Highlights 

• For 2014, premium revenue grew to over $12.8 billion, an increase of 36% compared with 2013, driven by increases in premium revenue for each of the Company's three segments.
   
• In 2014, WellCare was awarded a contract for the Florida Medicaid Managed Medical Assistance program (MMA) in 8 out of the 11 regions in Florida.  WellCare has a #1 market share and has grown from 394,000 members in the prior Medicaid program at year-end 2013 to over 650,000 in the Florida MMA program at December 31, 2014.
   
• As of January 2015, the Company's Medicare Advantage membership stood at 337,000 members.  The approximate decrease of 37,000 members was driven by the bid actions and county withdrawals in California designed to improve the performance of Easy Choice (resulting in a 28,000 member decrease in California) as well as the Company's exit of the Arizona, Missouri, and Ohio markets representing 8,000 members as of year-end 2014. For 2015, WellCare offers Medicare Advantage plans in 15 states.
   
• As of January 2015, the Company's PDP segment membership stood at 1.1 million compared to 1.4 million in December 2014 due to the actions the Company took in its 2015 bids submitted in June of 2014. For 2015, WellCare's PDP bids were below the benchmarks in 13 of the 33 CMS regions and within the de minimis range for 9 additional regions.
   
• The fourth quarter of 2014 included favorable prior period reserve development in the amount of $15.9 million.  Medical benefits payable remained at $1.5 billion as of December 31, 2014, compared with September 30, 2014.  Days in claims payable (DCP) were 46 days as of December 31, 2014, compared with 45 days as of September 30, 2014, and 42 days as of December 31, 2013.

Company Operations for the Fourth Quarter of 2014
       
As determined under GAAP, net income for the fourth quarter of 2014 was $7.7 million, or $0.18 per diluted share, compared with net income of $42.9 million, or $0.97 per diluted share, for the fourth quarter of 2013. Adjusted net income for the fourth quarter of 2014 was $18.0 million, or $0.41 per diluted share, compared with adjusted net income of $48.2 million, or $1.09 per diluted share, for the fourth quarter of 2013. The decrease resulted primarily from reduced gross margin rates in the Company's Medicaid and PDP segments. These unfavorable variances were offset in part by higher revenues and a lower administrative expense ratio.

Membership, as of December 31, 2014, increased 45% to 4.1 million compared with membership of 2.8 million as of December 31, 2013. Premium revenue for the fourth quarter of 2014 increased 40% year over year to $3.4 billion. Medical benefits expense for the fourth quarter of 2014 was $3.0 billion, an increase of 42% from the fourth quarter of 2013.

Selling, general and administrative (SG&A) expense as determined under GAAP was $283 million in the fourth quarter of 2014 compared with $219 million for the same period in 2013. Adjusted (non-GAAP) SG&A expense was $275 million in the fourth quarter of 2014, an increase of 31% from $210 million for the same period last year. The increase was driven primarily by increased membership and the Company's investments in people, processes and tools. The adjusted administrative expense ratio was 8.2% in the fourth quarter of 2014 compared with 8.7% for the same period in 2013. The decrease resulted from improved operating leverage associated with the Company's revenue growth, productivity gains, and lower compensation expense related to reduced management incentive compensation, offset in part by investments in operational infrastructure and growth initiatives.

Medicaid Health Plans Segment Operations
       
The Medicaid Health Plans segment membership increased by 551,000, or 31% year over year, to 2.3 million members as of December 31, 2014. The increase resulted mainly from growth in the Florida, Kentucky, and Georgia programs, as well as the inclusion of membership from the Company's New Jersey acquisition. Premium revenue was $2.1 billion for the fourth quarter of 2014, an increase of 45% year over year, and was driven by the increase in membership and changes in the geographic and demographic mix of membership, as well as higher per member per month rates relating to the Florida MMA program membership.

The Medicaid Health Plans segment gross margin rate for the fourth quarter of 2014 was 8.6%, a decrease of 300 basis points compared with the fourth quarter of 2013. The decrease resulted mainly from higher segment medical benefits ratio (MBR). The segment MBR of 91.7% for the fourth quarter of 2014 increased 330 basis points from the fourth quarter of 2013, primarily due to the impact of higher current period medical and pharmacy costs associated with the Florida MMA program and influenza costs that were higher than in fourth quarter of 2013, offset in part by net favorable prior period reserve development recognized in the fourth quarter of 2014 compared with the net unfavorable prior period development in the fourth quarter of 2013.

Medicare Health Plans Segment Operations
       
The Medicare Health Plans segment membership as of December 31, 2014, increased by 127,000 year over year, or 44%, to 417,000 members. Medicare Advantage plans membership as of December 31, 2014, was 374,000, an increase of 29%, or 84,000 members. Segment premium revenue for the quarter grew 29% year over year to just over $1 billion. The membership and revenue growth resulted primarily from organic sales activity primarily in Florida, California, New York, and Texas, as well as the membership gained in the Company's Windsor acquisition. Partially offsetting the increase in revenue was the impact of CMS premium rate decreases in 2014 compared with 2013.

The Medicare Health Plans segment gross margin rate for the fourth quarter of 2014 was 12.4%, an increase of 40 basis points compared with the fourth quarter of 2013. The increase resulted from lower segment MBR. The segment MBR of 86.5% for the fourth quarter of 2014 decreased 150 basis points from the fourth quarter of 2013, primarily as a result of net favorable prior period reserve development recognized in the fourth quarter of 2014 compared with the net unfavorable prior period development in the fourth quarter of 2013.

Medicare Prescription Drug Plans Segment Operations
       
The Medicare Prescription Drug Plans (PDPs) segment membership as of December 31, 2014, increased 595,000 year over year, or 75%, to 1.4 million members. The increase primarily was due to new members attributable to the outcome of the 2014 bids, as well as the inclusion of membership from the Windsor acquisition. Premium revenue for the quarter increased 46% to $252 million, primarily due to the increase in membership, offset in part by a lower average premium per member.

The PDP segment gross margin rate for the fourth quarter of 2014 was 19.1%, a decrease of 630 basis points year over year, as a result of the higher segment MBR as well as the implementation of the ACA industry fee. The segment MBR for the fourth quarter of 2014 of 79.8% increased 520 basis points compared with the fourth quarter of 2013. The increase resulted from higher drug unit costs, increased utilization of branded and specialty medications and the outcome of the Company's 2014 bids.

Cash Flow and Financial Condition
       
Net cash provided by operating activities was $299.3 million for the year ended December 31, 2014, compared with net cash provided by operating activities of $178.9 million for the year ended December 31, 2013.

As of December 31, 2014, unregulated cash and investments were approximately $89 million, compared with $458 million as of September 30, 2014. The decrease resulted mainly from funding provided to certain regulated subsidiaries for various subsidies and other payments the subsidiaries made on behalf of CMS as a Part D plan sponsor for which CMS will reimburse the Company in late 2015.

Financial Outlook
       
WellCare currently anticipates that for the year ending December 31, 2015, adjusted net income per diluted share will be between approximately $3.15 and $3.40.

Elements of the Company's 2015 financial outlook are as follows:

·        Premium revenue is expected to be between $13.5 and $13.8  billion.

·        Premium revenues and MBRs for each of the Company's segments are anticipated as follows:

·        The adjusted administrative expense ratio is expected to be between 8.0% and 8.2%. 

·        The ACA fee expense is expected to be between $230 and $235 million.  This amount does not reflect the anticipated reimbursement by state Medicaid government customers.
             
o   Similar to 2014, WellCare expects 100% of its Medicaid states to reimburse for the Medicaid portion of the ACA fee, grossed up for taxes;  this is expected to be between $215 million and $219 million

·        Depreciation and amortization expense is expected to be between $70 and $72 million 
·        Interest expense is anticipated to be between $47 and $49 million

·        The effective income tax rate is expected to be between 60.25% and 62.25%
             
·        Capital expenditures are expected to be between $110 million and $120 million in 2015
             
·        Adjusted Earnings will exclude the impact of:
             
o   Certain SG&A expenses related to previously disclosed government investigations and related litigation and resolution costs; and

o   Any transitory costs incurred in 2015 related to the Company's decision to change pharmacy benefit managers as of January 1, 2016

Complete News Release

The complete news release describing WellCare's third quarter 2014 results has been published on the Company's website at www.wellcare.com.

Webcast
       
A discussion of WellCare's fourth quarter of 2014 results will be webcast live on Wednesday, February 11, 2015, beginning at 8:30 a.m. Eastern Time. A replay will be available beginning approximately one hour following the conclusion of the live broadcast and will be available for 30 days. The webcast will be available via the Company's web site at www.wellcare.com.

About WellCare Health Plans, Inc.
       
WellCare Health Plans, Inc. provides managed care services targeted to government-sponsored health care programs, focusing on Medicaid and Medicare. Headquartered in Tampa, Fla., WellCare offers a variety of health plans for families, children, and the aged, blind, and disabled, as well as prescription drug plans. The Company served approximately 4.1 million members nationwide as of December 31, 2014. For more information about WellCare, please visit the Company's website at www.wellcare.com.

Basis of Presentation
       
In addition to results determined under GAAP, WellCare provides certain non-GAAP measurements that management believes are useful in assessing the Company's performance. Following is a description of the calculation of important GAAP and non-GAAP measures used in this news release.

Premium revenue [as used in this news release and basis of presentation below] = GAAP total premium revenue - (Medicaid state premium taxes revenue + Medicaid state reimbursements of the ACA industry fee).

Gross margin = premium revenue - (medical benefits expense + ACA industry fee expense).

Gross margin rate = gross margin / premium revenue.

MBR (non-GAAP) = medical benefits expense / premium revenue.  The Company's Medicaid MBR guidance uses this non-GAAP definition of MBR.

MBR (GAAP) = medical benefits expense / GAAP total premium revenue.

Net income and certain other operating results are reported after adjustment for certain SG&A expenses related to previously disclosed government investigations and related litigation and resolution costs. Management believes these government investigation-related expenses are not indicative of long-term business operations.

Adjusted SG&A expense (non-GAAP) = SG&A expense - certain SG&A expenses related to previously disclosed government investigations and related litigation and resolution costs.

The adjusted administrative expense ratio (non-GAAP) = adjusted SG&A expense / (total revenues - Medicaid state premium taxes revenue - Medicaid state ACA industry fee reimbursements revenue).

The administrative expense ratio (GAAP) = SG&A expense / total revenues.

Please refer to the schedules in this news release that provide supplemental information that reconcile results determined under GAAP to non-GAAP results.

The schedules contained in this news release may contain totals that do not foot due to rounding.

Cautionary Statement Regarding Forward-Looking Statements
       
This news release contains "forward-looking" statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as "expects," "anticipates," "intends," "plans," "believes," "estimates," and similar expressions are forward-looking statements. For example, statements regarding the Company's financial outlook and reimbursement of the ACA industry fee by state Medicaid programs contain forward-looking statements. Forward-looking statements involve known and unknown risks and uncertainties that may cause WellCare's actual future results to differ materially from those projected or contemplated in the forward-looking statements. These risks and uncertainties include, but are not limited to, WellCare's progress on top priorities such as improving health care quality and access, ensuring a competitive cost position, and delivering prudent, profitable growth, WellCare's ability to effectively estimate and manage growth, WellCare's ability to address operational challenges relating to new business, WellCare's ability to effectively execute and integrate acquisitions, potential reductions in Medicaid and Medicare revenue,  WellCare's ability to estimate and manage medical benefits expense effectively, including through its vendors and WellCare's ability to comply with the terms of the Corporate Integrity Agreement. Given the risks and uncertainties inherent in forward-looking statements, any of WellCare's forward-looking statements could be incorrect and investors are cautioned not to place undue reliance on any of our forward-looking statements.

Additional information concerning these and other important risks and uncertainties can be found in the Company's filings with the U.S. Securities and Exchange Commission (the SEC), included under the captions "Forward-Looking Statements" and "Risk Factors" in the Company's Annual Report on Form 10-­K for the year ended December 31, 2013, the Company's Quarterly Report on Form 10-Q for the period ended September 30, 2014, and other filings by WellCare with the SEC, which contain discussions of WellCare's business and the various factors that may affect it. Subsequent events and developments may cause actual results to differ, perhaps materially, from WellCare's forward-looking statements. WellCare undertakes no duty to update these forward-looking statements to reflect any future events, developments, or otherwise.

CONTACTS:
Investor:
Drew Asher
Senior Vice President and Chief Financial Officer
813-206-4421
drew.asher@wellcare.com

Media:
Crystal Warwell Walker
Director, Corporate Public Relations
813-206-2697
crystal.walker@wellcare.com