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Wellcare Health Plans, Inc. – ‘424B1’ on 12/17/04

On:  Friday, 12/17/04, at 8:41am ET   ·   Accession #:  950133-4-4654   ·   File #:  333-120672

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

12/17/04  Wellcare Health Plans, Inc.       424B1                  1:2.2M                                   Bowne - DC/FA

Document/Exhibit                   Description                      Pages   Size 

 1: 424B1       Prospectus                                          HTML   1.78M 

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7,500,000 Shares

COMMON STOCK

WellCare Health Plans, Inc. is offering 1,500,000 shares of common stock and the selling stockholders are offering 6,000,000 shares of common stock.

Our common stock is listed on the New York Stock Exchange under the symbol “WCG.” On December 16, 2004, the last sale price for the common stock as reported on the New York Stock Exchange was $33.12.

Investing in our common stock involves risks. See “Risk Factors” beginning on page 7.

PRICE $32.00 A SHARE

One of the selling stockholders has granted the underwriters the right to purchase up to an additional 1,125,000 shares to cover over-allotments. We will not receive any proceeds from the sale of shares of common stock by the selling stockholders.

The Securities and Exchange Commission and state securities regulators have not approved or disapproved these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

Morgan Stanley & Co. Incorporated expects to deliver the shares to purchasers on or about December 22, 2004.

MORGAN STANLEY

December 16, 2004

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      You should rely only on the information contained in this prospectus. We and the selling stockholders have not authorized anyone to provide you with information that is different from that contained in this prospectus. We and the selling stockholders are offering to sell, and seeking offers to buy, shares of common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of when this prospectus is delivered or when any sale of our common stock occurs.

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PROSPECTUS SUMMARY

      This summary highlights selected information contained elsewhere in this prospectus. It does not contain all of the information that may be important to you. You should read the following summary together with the more detailed information regarding our company, the common stock being sold in this offering and our consolidated and combined financial statements, including the notes to those statements, appearing elsewhere in this prospectus.

Our Business

      We arrange for the delivery of healthcare services, also known as “managed care services,” targeted exclusively to government-sponsored healthcare programs, focusing on Medicaid and Medicare. We have centralized core functions, such as claims processing and medical management, combined with marketing and provider relationships tailored to the local markets where we operate. We believe that this approach allows us to provide high-quality, affordable healthcare services to our members and offer cost saving opportunities to the states we serve, while maintaining mutually beneficial relationships with our providers and our regulators. We also believe that our approach to the delivery of managed care services will allow us to effectively grow our business, both through organic growth and acquisitions.

      We operate health plans in Florida, New York, Illinois, Indiana, Connecticut and Louisiana. In Florida, as of September 30, 2004, we served more than 527,000 members, and operated the two largest Medicaid managed care plans. In New York, Illinois, Indiana and Connecticut, as of September 30, 2004, we served approximately 66,000, 63,000, 45,000 and 33,000 members, respectively. We began offering services to Medicare beneficiaries in Louisiana in September 2004.

Our Markets and Opportunities

      The market for government-sponsored healthcare programs in the United States is large and growing. In 2003, Medicaid covered 42.7 million enrollees and Medicare covered 41.1 million enrollees, according to the federal government’s Centers for Medicare & Medicaid Services, or CMS. Enrollment in Medicaid managed care programs has grown rapidly in recent years, from 13.3 million, or 40% of enrollees, in 1996 to 25.3 million, or 59.1% of enrollees, in 2003, according to CMS. These managed care programs generally arrange for the delivery of an array of healthcare services to members at a fixed monthly payment per member.

      We are the largest provider of Medicaid managed care services in the State of Florida, where we also operate a large Medicare plan. In 2003, we added approximately 44,000 members to our State Children’s Health Insurance Program, or SCHIP, known in Florida as Healthy Kids. As of September 30, 2004, our Healthy Kids membership has grown to over 101,000 members. Florida has approximately 2.2 million Medicaid enrollees, according to CMS, which includes beneficiaries under the Supplemental Security Income and the Temporary Assistance to Needy Families programs. Florida also has 2.9 million Medicare enrollees, the second largest population of any state. Based on our history of providing quality managed care services in Florida, we believe we are well positioned to continue increasing our membership in the state.

      Our health plans in New York and Connecticut have experienced significant membership growth under our management. During the year ended December 31, 2003, our membership in New York grew approximately 23% to nearly 56,000 members, and our membership in Connecticut grew approximately 39% to over 24,000 members. For the nine-month period ended September 30, 2004, our membership in New York grew approximately 19% to nearly 66,000 members, and our membership in Connecticut grew approximately 37% to nearly 33,000 members. We believe that both of these states are attractive markets. We believe that the New York market opportunity is substantial, with approximately 3.7 million Medicaid and 2.8 million Medicare enrollees, according to CMS.

      In June 2004, we acquired Harmony Health Systems, Inc., a provider of Medicaid managed care plans in Illinois and Indiana. Since the acquisition, membership growth under our management has increased approximately 29% to over 108,000 members as of September 30, 2004. We plan to leverage our approach to the delivery of managed care programs by expanding our Medicaid, Medicare and other products in our current markets and in additional counties and states.

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RISK FACTORS

      This offering and an investment in our common stock involve a high degree of risk. You should carefully consider the following risks and all other information contained in this prospectus before purchasing our common stock. If any of the following risks actually occur, our business, financial condition and results of operations could be materially and adversely affected, the value of our stock could decline, and you may lose all or part of your investment. The risks and uncertainties described below are those that we currently believe may materially affect our company. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations.

Risks Related to Our Business

If our government contracts are not renewed or are terminated, our business could be substantially impaired.

      We provide our Medicaid, Medicare, SCHIP and other services through a limited number of contracts with state, federal or local government agencies. These contracts generally have terms of one or two years and are subject to nonrenewal by the applicable agency. All of our government contracts are terminable for cause if we breach a material provision of the contract or violate relevant laws or regulations. In addition, our right to add new members may be suspended by a government agency if it finds deficiencies in our provider network or operations. For the year ended December 31, 2003, the percentage of our total premium revenue that we derived from our Medicaid contracts in Florida, New York and Connecticut was 59%, 9% and 4%, respectively; the percentage derived from our Medicare contracts was 27%, which was primarily derived from our Florida Medicare business; and the remainder is from our commercial and other contracts. For the nine-month period ended September 30, 2004, the percentage of total premium revenue derived from our Medicaid contracts in Florida, New York, Connecticut, Illinois and Indiana was 56%, 9%, 4%, 3% and 2%, respectively; the percentage derived from our Medicare contracts was 25%, with the remaining 1% of premium revenue coming from our commercial and other contracts. We no longer operate a commercial line of business.

      Our contracts with the states are subject to cancellation or a potential freeze on enrollment by the state in the event of the unavailability of state or federal funding. In some jurisdictions, a cancellation or enrollment freeze may be immediate and in other jurisdictions a notice period is required. Some of our contracts are also subject to termination or are eligible for renewal through annual competitive bids. We may face increased competition as other plans attempt to enter our markets through the contracting process.

      If we are unable to renew, or to successfully rebid or compete for any of our government contracts, or if any of our contracts are terminated, our business could be substantially impaired. If any of those circumstances were to occur, we would likely pursue one or more alternatives, including seeking to enter into contracts in other geographic markets, seeking to enter into contracts for other services in our existing markets, or seeking to acquire other businesses with existing government contracts. If we were unable to do so, we could be forced to cease conducting business. In any such event, our revenues would decrease materially.

Because our premiums, which generate most of our revenues, are fixed by contract, we are unable to increase our premiums during the contract term if our corresponding medical benefits expense exceeds our estimates.

      Most of our revenues are generated by premiums consisting of fixed monthly payments per member. These payments are fixed by contract, and we are obligated during the contract period, which is generally one or two years, to provide or arrange for the provision of healthcare services as established by state and federal governments. We have less control over costs related to the provision of healthcare services than we do over our selling, general and administrative expense. Historically, our medical benefits expense as a percentage of premium revenue has fluctuated. For example, our medical benefits expense was 84.8% of our combined premium revenue in 2002, 82.6% in 2003 and 81.6% for the nine-month period ended September 30, 2004. If our medical benefits expense exceeds our estimates, we will be unable to adjust the premiums we receive under our current contracts, and our profits may decline.

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Reductions in funding for government healthcare programs could substantially reduce our profitability.

      All of the healthcare services we offer are through government-sponsored programs, such as Medicaid and Medicare. As a result, our profitability is dependent, in large part, on continued funding for government healthcare programs at or above current levels. For example, the premium rates paid by each state to health plans like ours differ depending on a combination of factors such as upper payment limits established by the state and federal governments, a member’s health status, age, gender, county or region, benefit mix and member eligibility categories. Future Medicaid premium rate levels may be affected by continued government efforts to contain medical costs or state and federal budgetary constraints. Many of the states in which we operate are currently experiencing fiscal challenges leading to significant budget deficits. According to the National Association of State Budget Officers, Medicaid spending consumed 21.4% of the average state’s budget in 2003, representing the second largest expenditure. According to the Congressional Budget Office, total state spending on Medicaid is expected to reach $127 billion in 2004, representing a 10.5% annual increase from 2002. Some states may find it difficult to continue paying the current rates to Medicaid health plans. Changes in Medicaid funding, for example, may lead to reductions in the number of persons enrolled in or eligible for Medicaid, reductions in the amount of reimbursement or elimination of coverage for certain benefits such as pharmacy, behavioral health or other benefits. In some cases, changes in funding could be made retroactive. All of the states in which we operate are presently considering, or recently have considered, legislation or regulations that would reduce reimbursement rates, payment levels, benefits covered or the number of persons eligible for Medicaid. Reductions in Medicaid payments could reduce our profitability if we are unable to reduce our expenses. Similarly, reductions in payments under Medicare or the other programs under which we offer health plans could likewise reduce our profitability.

      Federal budgetary constraints also may limit premiums payable under our Medicare plans. For example, as a result of the Balanced Budget Act of 1997, annual increases on premiums paid to many Medicare+Choice (now known as Medicare Advantage) plans were subject to a 2% cap, even though overall Medicare healthcare expenses were increasing at a higher rate. Moreover, recent changes in Medicare pursuant to the Medicare Modernization Act of 2003 permit premium levels for certain plans to be established through competitive bidding, with Congress retaining the ability to limit increases in premium levels established through bidding from year to year.

We are subject to extensive government regulation, and any violation of the laws and regulations applicable to us could reduce our revenues and profitability and otherwise adversely affect our operating results.

      Our business is extensively regulated by the federal government and the states in which we operate. The laws and regulations governing our operations are generally intended to benefit and protect health plan members and providers rather than stockholders. The government agencies administering these laws and regulations have broad latitude to enforce them. These laws and regulations, along with the terms of our government contracts, regulate how we do business, what services we offer, and how we interact with our members, providers and the public. We are subject, on an ongoing basis, to various governmental reviews, audits and investigations to verify our compliance with our contracts and applicable laws and regulations. An adverse review, audit or investigation could result in one or more of the following:

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      Any of these events could reduce our revenues and profitability and otherwise adversely affect our operating results. See “— Restrictions on our ability to market would adversely affect our revenue.”

If we are unable to manage medical benefits expense effectively, our profitability will likely be reduced or we could cease to be profitable.

      Our profitability depends, to a significant degree, on our ability to predict and effectively manage our costs related to the provision of healthcare services. Relatively small changes in the ratio of our expenses related to healthcare services to the premiums we receive, or medical benefits ratio, can create significant changes in our financial results. Factors that may cause medical benefits expense to exceed our estimates include:

      Because of the relatively high average age of the Medicare population, medical benefits expense for our Medicare plans may be particularly difficult to control. According to CMS, from 1967 to 2002, Medicare healthcare expenses nationwide increased on average by 13.2% annually.

      Although we have been able to manage our medical benefits expense through a variety of techniques, including various payment methods to primary care physicians and other providers, advance approval for hospital services and referral requirements, medical management and quality management programs, upgraded information systems, and reinsurance arrangements, we may not be able to continue to manage these expenses effectively in the future. If our medical benefits expense increases, our profits could be reduced or we may not remain profitable. For example, a hypothetical 1% increase in our medical benefits ratio would have reduced our earnings before income taxes for the year ended December 31, 2003 and the nine-month period ended September 30, 2004 by $10.4 million and $10.0 million, respectively. The medical benefits ratio represents our medical benefits expense as a percentage of our premium revenue.

      We maintain reinsurance to protect us against severe or catastrophic medical claims, but we cannot assure you that such reinsurance coverage currently is or will be adequate or available to us in the future or that the cost of such reinsurance will not limit our ability to obtain it.

A failure to estimate incurred but not reported medical benefits expense accurately will affect our profitability.

      Our medical benefits expense includes estimates of medical claims incurred but not reported, or IBNR. We, together with our internal and consulting actuaries, estimate our medical cost liabilities using actuarial methods based on historical data adjusted for payment patterns, cost trends, product mix, seasonality, utilization of healthcare services and other relevant factors. Actual conditions, however, could differ from those assumed in the estimation process. Due to the uncertainties associated with the factors used in these assumptions, materially different amounts could be reported in our financial statements for a particular period under different conditions or using different assumptions. Adjustments, if necessary, are made to medical benefits expense when the criteria used to determine IBNR change and when actual claim costs are ultimately determined. Although our estimates of IBNR have been adequate since our acquisition of the WellCare businesses, they may be inadequate in the future, which would adversely affect our results of operations. Further, our inability to estimate IBNR accurately may also affect our ability to take timely corrective actions, further exacerbating the extent of any adverse effect on our results.

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We derive a substantial portion of our revenues and profits from operations in Florida, and legislative or regulatory actions, economic conditions or other factors that adversely affect those operations could materially reduce our revenues and profits.

      For the year ended December 31, 2003 and the nine-month period ended September 30, 2004, our Florida health plans accounted for 86.0% and 80.7%, respectively, of our total premium revenues. If we are unable to continue to operate in Florida, or if our current operations in any portion of Florida are significantly curtailed, our revenues will decrease materially. Our reliance on our operations in Florida could cause our revenues and profitability to change suddenly and unexpectedly, depending on legislative or regulatory actions, economic conditions and similar factors. For example, Florida has recently tightened the re-certification requirements for members enrolled in its Healthy Kids SCHIP program, making it more difficult for members to remain in the program. When these actions become effective, which we expect will occur in December 2004, it is likely that our membership in this program will decline. In addition, our significant market share in Florida may make it more difficult for us to expand our membership in Florida. Our inability to continue to operate in Florida, or a decrease in the revenues of our Florida operations, would harm our overall operating results.

Our limited operating history as a stand-alone entity makes evaluating our business and future prospects difficult.

      We were formed in May 2002 to acquire the WellCare group of companies. Until the closing of that acquisition in July 2002, the companies that comprise our Florida operations had operated as a closely-held business, and our New York and Connecticut businesses had operated as subsidiaries of a public company, the majority stockholders of which were the owners of the Florida operations. Almost all of the senior members of our current management have joined us recently, including Todd S. Farha, our President and Chief Executive Officer. Our limited operating history under current management may not be adequate to enable you to fully assess our future prospects.

We may not be able to sustain our high rates of historic growth.

      From December 31, 1999 to December 31, 2003, our membership grew at an average annual rate of 37%, and from September 30, 2003 to September 30, 2004, our membership grew by 47%, of which approximately 26% represented organic growth. An important aspect of our strategy is continued growth in our existing markets. We may not be able to sustain our high historical growth rates, which would impair our ability to implement this strategy. For example, we already have a large share of the Medicaid managed care market in Florida, and the Florida Medicaid market is highly penetrated. These factors may limit our ability to continue to increase our membership in Florida, which is our largest market. If we are unable to continue to increase our membership in the states in which we currently operate, we may not be able to successfully implement our growth strategy.

We may not be able to realize the benefits we anticipate from the acquisition of Harmony Health Systems.

      As a result of our acquisition of Harmony, we face significant challenges in integrating organizations, operations, technology and services in a timely and efficient manner and in retaining key personnel. Cost savings, revenue growth and other anticipated benefits of the acquisition may not materialize. The acquisition may result in a diversion of our management’s attention, loss of management-level and other key employees of Harmony, and an inability to integrate management, systems and operations, in particular because Harmony does not currently operate on our Perot Systems’ Diamond 950 claims-processing software. The failure to integrate WellCare and Harmony successfully and to manage the challenges presented by the integration process may result in our not achieving the anticipated benefits of the acquisition.

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We may be unsuccessful in implementing our growth strategy if we are unable to make or finance other acquisitions on favorable terms or integrate the businesses we acquire into our existing operations.

      Acquisitions of contract rights and other health plans are an important element of our growth strategy. We may be unable to identify and complete appropriate acquisitions rapidly enough, if at all, to meet our or our investors’ expectations for future growth. For example, many of the other potential purchasers of contract rights and plans have greater financial resources than we have. In addition, we are generally required to obtain regulatory approval from one or more state agencies when making acquisitions, which may require a public hearing. This is the case regardless of whether we already operate a plan in the state in which the business to be acquired is located. We may be unable to comply with these regulatory requirements for an acquisition in a timely manner, or at all. Moreover, some sellers may insist on selling assets that we do not want, such as commercial lines of business, or transferring their liabilities to us as part of the sale of their companies or assets. Even if we identify suitable acquisition targets, we may be unable to complete acquisitions or obtain the necessary financing for these acquisitions on terms favorable to us, or at all. The market price of Medicaid plans has generally increased recently, which may increase the amount we are required to pay to complete acquisitions.

      Further, to the extent we complete acquisitions, we may be unable to realize the anticipated benefits from acquisitions because of operational factors or difficulties in integrating the acquisitions with our existing businesses. This may include the integration of:

For all of the above reasons, we may not be able to successfully implement our acquisition strategy.

We may be unable to expand into some geographic areas without incurring significant additional costs.

      We are likely to incur additional costs if we enter states or counties where we do not currently operate. Our rate of expansion into other geographic areas may also be inhibited by:

      Accordingly, we may be unsuccessful in entering other metropolitan areas, counties or states.

Ineffective management of our growth may adversely affect our results of operations, financial condition and business.

      Depending on acquisition and other opportunities, we expect to continue to increase our membership and to expand into other markets. In 1999, we had total revenue of approximately $275 million. In 2003, we had total revenue of more than $1.0 billion, and for the nine-month period ended September 30, 2004, our total revenue exceeded $997 million. Continued rapid growth could place a significant strain on our management

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The new Medicare legislation makes changes to the Medicare program that could reduce our profitability and increase competition for our existing and prospective members.

      On December 8, 2003, President Bush signed the Medicare Modernization Act of 2003. This legislation makes significant changes to the Medicare program and is complex and wide-ranging. There are numerous provisions in the legislation that will influence our Medicare business. CMS has issued proposed regulations for comment under Titles I (prescription drug benefits) and II (Medicare Advantage Program) of the Act. Until the final regulations are released, it is difficult to predict the extent to which our business will be affected. We believe that many of these changes will benefit the managed care sector. However, the new bidding process for determining rates, expanded benefits and shifts in certain coverage responsibilities pursuant to the Act may increase competition and create uncertainties, including the following:

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We may be unsuccessful in implementing our growth strategy if we are unable to meet submission and approval deadlines imposed by CMS.

      CMS has imposed rigorous deadlines for the filing of applications that are important to support our growth strategy. These applications must be filed with CMS in order for us to offer a new plan in a new location, or to expand an existing plan into additional service areas. In order for any such application to be effective in 2005, it must be submitted to CMS by February 15, 2005 for opening a new plan, or by March 1, 2005 for expansion of an existing plan into additional service areas. In order for any such application to be effective by January 2006, it also must be submitted to CMS by late winter or early spring 2005. In addition, to be effective in 2005 or 2006, any such application must be approved by CMS by June 2005. If an application is not approved by the June 2005 deadline, then any approval would not be effective before 2007, or in the case of new local (as opposed to regional) PPO plans, 2008. As a result, we must devote extensive resources to preparing and timely filing applications, and we cannot be sure that any applications we submit will be approved by the deadline imposed by CMS. If we are unable to submit these applications by the applicable deadlines, or if CMS does not approve our applications by the June 2005 deadline, we may be unsuccessful in implementing our growth strategy. In addition, CMS has imposed an annual deadline of the first Monday of each June for submission of competitive bid proposals for participation in the Medicare Advantage program beginning in the following year, and may impose an even earlier deadline for submission of some portions of the bid, and our failure to submit those proposals on time could prevent our continued participation in the Medicare Advantage program, which could materially affect our revenues and profits.

Changes, other than the new Medicare legislation, in federal funding mechanisms also could reduce our profitability.

      In addition to changes pursuant to the new Medicare legislation, other changes in federal funding mechanisms could reduce our profitability. For example, as a part of the administration’s 2004 budget submission to Congress, the Department of Health and Human Services announced principles for Medicaid reform. The proposal would establish two capped allotments for states combining both Medicaid and SCHIP funds, one for acute care and one for long-term care. Under this proposal, all mandatory populations and benefits would continue to be covered as required under current law. States, however, would be given flexibility for optional populations and benefits. The proposal would be revenue neutral over a 10-year period, although states would receive additional funds over the first seven years, with corresponding funding reductions in years eight through 10.

      The proposal was meant to provide increased flexibility to the states in managing their Medicaid and SCHIP programs, in particular in the design of benefit packages for optional populations. Governors working in concert with the Department of Health and Human Services were unable to reach agreement on these principles and for the time being, Congress has not considered the proposal. It is uncertain whether this proposal, or a variation thereof, will eventually be enacted. Congress instead passed a $20.0 billion fiscal relief program for the states, which included a $10.0 billion increase in the share of medical assistance expenditures provided to each state’s Medicaid program, known as the Federal Medical Assistance Percentage.

      If the Department’s proposal is ultimately enacted by Congress and the number of persons enrolled in Medicaid or SCHIP decreases in the states in which we operate or the scope of benefits provided is reduced, or expanded without a corresponding increase in payments made to us, our growth, revenues and profitability could be reduced.

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We are required to comply with laws governing the transmission, security and privacy of health information, and we have not yet determined what our total compliance costs will be.

      Regulations under the Health Insurance Portability and Accountability Act of 1996, or HIPAA, requires us to comply with standards for the exchange of health information within our company and with third parties, such as healthcare providers, business associates, and our members. These include standards for common healthcare transactions, such as claims information, plan eligibility, payment information and the use of electronic signatures, unique identifiers for providers and employers, security, privacy and enforcement.

      The Department of Health and Human Services finalized the transaction standards on August 17, 2000. While we initially were required to comply with them by October 16, 2002, Congress passed legislation in December 2001 that delayed the compliance date until October 16, 2003, but only for entities that submitted a compliance plan by the original implementation deadline, which we did. On February 20, 2003, the Department published certain modifications to the final transaction standards, but these changes did not affect the October 16, 2003 compliance deadline. In July 2003, CMS urged the adoption of “contingency plans” to help prevent disruptions in the healthcare payment system. In response, we adopted a contingency plan, pursuant to which we continue to process HIPAA standard transactions and also engage in legacy transactions as appropriate. The Department issued the privacy standards on December 28, 2000, and after certain delays, they became effective on April 14, 2001, with a compliance date of April 14, 2003. Sanctions for failing to comply with the HIPAA health information practices provisions include criminal penalties and civil sanctions. The security standards became effective April 21, 2003, with a compliance date of April 21, 2005 for most covered entities.

      HIPAA also provides that to the extent that state laws impose stricter privacy standards than HIPAA privacy regulations, a state seeks and receives an exception from the Department of Health and Human Services regarding certain state laws or state laws concern certain specified areas, such state standards and laws will not be preempted. The states’ ability to promulgate stricter rules, and uncertainty regarding many aspects of the regulations, make compliance with the relatively new regulatory regime difficult and more expensive.

      We believe we have or will have met the HIPAA deadlines for the adoption and implementation of appropriate policies and procedures. However, given its complexity, the recent adoption of several final regulations, the possibility that the regulations may change and may be subject to changing and perhaps conflicting interpretation, our ability to comply with all of the HIPAA requirements is uncertain. Moreover, due to the evolving nature of the HIPAA requirements we have not yet determined what our total compliance costs will be.

Future changes in healthcare law may reduce our profitability or liquidity.

      Healthcare laws and regulations, and their interpretations, are subject to frequent change. Changes in existing laws or regulations, or their interpretations, or the enactment of new laws or the issuance of new regulations could reduce our profitability, among other things, by:

      Changes in state law also may adversely affect our profitability. Laws relating to managed care consumer protection standards, including increased plan information disclosure, limits to premium increases, expedited appeals and grievance procedures, third party review of certain medical decisions, health plan liability, access to specialists, clean claim payment timing, physician collective bargaining rights and confidentiality of medical records either have been enacted or continue to be under discussion. New healthcare reform legislation may

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      The statutory framework for our regulated subsidiaries’ statutory net worth or reserve requirements may change over time. For instance, New York has proposed a 150% increase in reserve requirements. Other states may elect to adopt risk-based capital requirements based on guidelines adopted by the National Association of Insurance Commissioners. Currently, our operations in Illinois, Indiana, Connecticut and Louisiana are subject to these requirements. Our subsidiaries are also subject to their state regulators’ general oversight powers. Regardless of whether they adopt the risk-based capital requirements, these state regulators can require our subsidiaries to maintain minimum levels of statutory net worth in excess of amounts required under the applicable state laws if they determine that maintaining such additional statutory net worth is in the best interests of our members. The proposed increase in reserve requirements to which our New York managed care plan would be subject would materially increase our reserve requirements in New York. If our subsidiaries are required to maintain higher levels of statutory net worth due to the adoption of the risk-based capital requirements by the states in which we operate, or because state regulators otherwise deem this to be in the best interests of our members, our liquidity could be materially reduced, which could harm our ability to implement our business strategy, for example by hindering our ability to make debt service payments on amounts drawn from our credit facilities.

Restrictions on our ability to market would adversely affect our revenue.

      Although we enroll some of our new members through auto enrollment programs and voluntary member enrollment, we rely on our marketing and sales efforts for a significant portion of our membership growth. All of the states in which we currently operate permit marketing but impose strict requirements and limitations as to the types of marketing activities that are permitted. In Florida and New York, other plans have been prohibited from engaging in marketing activities for a period of time after being found to have violated the state’s requirements. While no such action is currently pending or threatened by the State of Florida against us, from time to time we have been cited, and in some cases fined, for alleged marketing violations. Until recently, our New York Medicare business was prohibited from marketing as a result of past audits and regulatory deficiencies. In addition, the state of Connecticut recently imposed a prohibition of marketing on our Connecticut plan as the result of allegedly having engaged in a repeated practice of marketing violations. The state has since lifted the marketing prohibition after imposing a monetary fine and accepting our corrective action plan. In circumstances where our marketing efforts are prohibited or curtailed, our ability to increase or sustain membership will be significantly harmed, which will adversely affect our revenue.

Persistent operational deficiencies related to our New York business may adversely affect our operations or growth in New York.

      We inherited a number of operational deficiencies when we acquired our New York business, which resulted in a prohibition on marketing our Medicare program in New York. Although we have made investments in our New York business to address these deficiencies and are once again permitted to market our Medicare health plan in New York, we continue to experience problems related to these deficiencies, including gaps in our provider network. Moreover, government regulators, members and providers, and potential members and providers, may have a negative perception of our New York health plans as a result of these operational deficiencies. These issues may result in continued heightened scrutiny by federal, state

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If we are unable to maintain satisfactory relationships with our providers, our profitability could decline and we may be precluded from operating in some markets.

      Our profitability depends, in large part, upon our ability to enter into cost-effective contracts with hospitals, physicians and other healthcare providers in appropriate numbers in our geographic markets and at convenient locations for our members. In any particular market, however, providers could refuse to contract, demand higher payments or take other actions that could result in higher medical benefits expense. In some markets, certain providers, particularly hospitals, physician/hospital organizations or multi-specialty physician groups, may have significant market positions or near monopolies. If such a provider or any of our other providers refuse to contract with us, use their market position to negotiate contracts that might not be cost-effective or otherwise place us at a competitive disadvantage, those activities could adversely affect our operating results in that market area. In the long term, our ability to contract successfully with a sufficiently large number of providers in a particular geographic market will affect the relative attractiveness of our managed care products in that market and could preclude us from renewing our Medicaid or Medicare contracts in those markets or from entering into new markets.

      Our provider contracts with network primary care physicians and specialists generally have terms of one year, with automatic renewal for successive one-year terms. We may terminate these contracts for cause, based on provider conduct or other appropriate reasons, subject to laws giving providers due process rights. The contracts generally may be cancelled by either party without cause upon 60 or 90 days prior written notice. Our contracts with hospitals generally have terms of one to two years, with automatic renewal for successive one-year terms. We may terminate these contracts for cause, based on provider misconduct or other appropriate reasons. Our hospital contracts generally may be cancelled by either party without cause upon 120 days prior written notice. We may be unable to continue to renew such contracts or enter into new contracts enabling us to serve our members profitably. We will be required to establish acceptable provider networks prior to entering new markets. Although we have established long-term relationships with many of our network providers, we may be unable to maintain those relationships or enter into agreements with providers in new markets on a timely basis or under favorable terms. If we are unable to retain our current provider contracts or enter into new provider contracts timely or on favorable terms, our profitability could decline.

If a state fails to renew its federal waiver application for mandated Medicaid enrollment into managed care or such application is denied, our membership in that state will likely decrease.

      A significant percentage of our Medicaid plan enrollment results from mandatory Medicaid enrollment in managed care plans. States may only mandate Medicaid enrollment into managed care through CMS-approved plan amendments or under federal waivers or demonstrations. Waivers and programs under demonstrations are generally approved for two-year periods and can be renewed on an ongoing basis if the state applies and the waiver request is approved or renewed by CMS. We have no control over this renewal process. If a state in which we operate does not renew its mandated program or the federal government denies the state’s application for renewal, our business would suffer as a result of a likely decrease in membership.

We rely on the accuracy of eligibility lists provided by the government. Inaccuracies in those lists could reduce our revenues or profitability.

      Premium payments to us are based upon eligibility lists produced by the government. From time to time, states require us to reimburse them for premiums paid to us based on an eligibility list that a state later discovers contains individuals who are not in fact eligible for any government-sponsored program or are eligible for a different premium category or a different program. Recently, for example, we received a notice from the state of Florida concerning an audit of individuals who are eligible under both Medicare and Medicaid. The state contends that Medicare, rather than Medicaid, should have been the primary payor for these individuals, and is seeking recoupment of excess premiums allegedly paid in error. We are currently

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Our business depends on our information systems, and our inability to effectively integrate, manage and keep secure our information systems could disrupt our operations.

      Our business is dependent on effective and secure information systems that assist us in, among other things, monitoring utilization and other cost factors, supporting our healthcare management techniques, processing provider claims and providing data to our regulators. Our providers also depend upon our information systems for membership verifications, claims status and other information. If we experience a reduction in the performance, reliability or availability of our information systems, our operations and ability to produce timely and accurate reports could be adversely affected. In addition, many of our key software applications are licensed from third parties. If the owner of the software becomes insolvent or is otherwise unable to support the software, our operations could be adversely affected. Our operations could also be adversely affected if the software owner is unwilling to continue to support the software or charges materially increased fees for such support.

      Our disaster recovery plan was tested and implemented in May 2004. We will not have a fully implemented business continuity program until the end of 2005. Events outside our control, including acts of nature, such as hurricanes, earthquakes or fires, or terrorism, could significantly impair our information systems and applications.

      Our information systems and applications require continual maintenance, upgrading and enhancement to meet our operational needs. If we are unable to maintain or expand our systems, we could suffer from, among other things, operational disruptions, such as the inability to pay claims or to make claims payments on a timely basis, loss of members, difficulty in attracting new members, regulatory problems and increases in administrative expenses.

      Our business requires the secure transmission of confidential information over public networks. Advances in computer capabilities, new discoveries in the field of cryptography or other events or developments could result in compromises or breaches of our security systems and client data stored in our information systems. Anyone who circumvents our security measures could misappropriate our confidential information or cause interruptions in services or operations. The Internet is a public network, and data is sent over this network from many sources. In the past, computer viruses or software programs that disable or impair computers have been distributed and have rapidly spread over the Internet. Computer viruses could be introduced into our systems, or those of our providers or regulators, which could disrupt our operations, or make our systems inaccessible to our providers or regulators. We may be required to expend significant capital and other resources to protect against the threat of security breaches or to alleviate problems caused by breaches. Because of the confidential health information we store and transmit, security breaches could expose us to a risk of regulatory action, litigation, possible liability and loss. Our security measures may be inadequate to prevent security breaches, and our business operations would be adversely affected by cancellation of contracts and loss of members if they are not prevented.

We may not have adequate intellectual property rights in our brand names for our health plans, and we may be unable to adequately enforce such rights.

      Our success depends, in part, upon our ability to market our health plans under our brand names, including “WellCare,” “HealthEase,” “Staywell” and “Harmony.” While we hold federal trademark registrations for the “WellCare” trademark, we have not taken enforcement action to prevent infringement of our federal trademark and have not secured registrations of our other marks. Other businesses may have prior rights in the brand names that we market under or in similar names, which could limit or prevent our ability to

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We are subject to competition that may limit our ability to increase or maintain membership in the markets we serve.

      We operate in a highly competitive environment and in an industry that is currently subject to significant changes due to business consolidations, new strategic alliances and aggressive marketing practices by other managed care organizations. We compete for members principally on the basis of size, location and quality of provider network, benefits provided, quality of service and reputation. A number of these competitive elements are partially dependent upon and can be positively affected by financial resources available to a health plan. Many other organizations with which we compete have substantially greater financial and other resources than we do. In addition, changes resulting from the new Medicare legislation may bring additional competitors into our market area. As a result, we may be unable to increase or maintain our membership.

We have substantial debt obligations that could restrict our operations.

      We have a significant amount of outstanding indebtedness, including $158.9 million in borrowings under our senior secured credit facilities and $25.0 million in outstanding debt to the parties that sold our Florida operations to us. We have available borrowing capacity under our senior secured revolving credit facility of approximately $50.0 million. We may also incur additional indebtedness in the future. Our substantial indebtedness could have adverse consequences, including:

      Our debt service obligations will require us to use a portion of our operating cash flow to pay interest and principal on indebtedness instead of for other corporate purposes, including funding future expansion of our business and ongoing capital expenditures. If our operating cash flow and capital resources are insufficient to service our debt obligations, we may be forced to sell assets, seek additional equity or debt capital or restructure our debt. However, these measures might be unsuccessful or inadequate in permitting us to meet scheduled debt service obligations.

Restrictions and covenants in our credit facilities and instruments governing our additional indebtedness may limit our ability to make certain acquisitions and declare dividends.

      The documents governing our senior secured credit facilities and our indebtedness to the parties that sold our Florida operations to us contain various restrictions and covenants, including prescribed fixed charge coverage and leverage ratios and limitations on capital expenditures and acquisitions, that restrict our financial and operating flexibility, including our ability to make certain acquisitions and declare dividends without lender approval.

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Our failure to comply with covenants in our debt instruments could result in our indebtedness being immediately due and payable and the loss of our assets.

      Our indebtedness to the parties that sold our Florida operations to us is secured by a pledge of 51% of the outstanding capital stock of our subsidiary, WCG Health Management, Inc., which is the indirect parent corporation of all of our operating subsidiaries. Our credit facilities are similarly secured by a pledge of stock of our operating subsidiaries, as well as a pledge of substantially all of the assets of our non-regulated entities. If we fail to pay any of our indebtedness when due, or if we breach any of the other covenants in the instruments governing our indebtedness, one or more events of default, including cross-defaults among multiple portions of our indebtedness, could result. These events of default could permit our creditors to declare all amounts owing to be immediately due and payable. If we were unable to repay indebtedness owed to our secured creditors, they could proceed against the collateral securing that indebtedness.

We are dependent on our executive officers and other key associates.

      Our operations are highly dependent on the efforts of our President and Chief Executive Officer and our other senior executives. Although some of our executives have entered into employment agreements with us, these agreements may not provide sufficient incentives for those executives to continue their employment with us. While we believe that we could find replacements, the loss of their leadership, knowledge and experience could adversely affect our operations. Replacing many of our executive officers might be difficult or take an extended period of time because a limited number of individuals in the managed care industry have the breadth and depth of skills and experience necessary to operate and expand successfully a business such as ours. We do not currently maintain key-man life insurance on any of our executive officers other than our President and Chief Executive Officer, and such insurance may not be sufficient to cover the costs of recruiting and hiring a replacement Chief Executive Officer or the loss of his services. Our success is also dependent on our ability to hire and retain qualified management, technical and medical personnel. We may be unsuccessful in recruiting and retaining such personnel, which could adversely affect our operations.

Claims relating to medical malpractice and other litigation could cause us to incur significant expenses.

      Our providers involved in medical care decisions may be exposed to the risk of medical malpractice claims. A small percentage of these providers do not have malpractice insurance. Due to increased costs or inability to secure malpractice insurance, the percentage of physicians who do not have malpractice insurance may increase, particularly in Florida, our largest current source of revenue. Although our network providers are independent contractors, claimants sometimes allege that a managed care organization such as us should be held responsible for alleged provider malpractice, particularly where the provider does not have malpractice insurance, and some courts have permitted that theory of liability; however, the Florida legislature has enacted legislation that has partially limited liability of managed care organizations for provider malpractice. In addition, managed care organizations may be sued directly for alleged negligence, such as in connection with the credentialing of network providers or for alleged improper denials or delay of care. In addition, Congress and several states have considered or are considering legislation that would expressly permit managed care organizations to be held liable for negligent treatment decisions or benefits coverage determinations.

      From time to time, we are party to various other litigation matters, some of which seek monetary damages. We cannot predict with certainty the eventual outcome of any pending litigation or potential future litigation, and we might incur substantial expense in defending these or future lawsuits or indemnifying third parties with respect to the results of such litigation.

      We maintain errors and omissions insurance with a policy limit of $10 million and other insurance coverage and, in some cases, indemnification rights that we believe are adequate based on industry standards. However, potential liabilities may not be covered by insurance or indemnity, our insurers or indemnifying parties may dispute coverage or may be unable to meet their obligations, or the amount of our insurance or indemnification coverage may be inadequate. We cannot assure you that we will be able to obtain insurance coverage in the future, or that insurance will continue to be available on a cost-effective basis, if at all. Moreover, even if claims brought against us are unsuccessful or without merit, we would have to defend

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Growth in the number of Medicaid eligibles may be counter-cyclical, which could adversely affect our operating results when general economic conditions are improving.

      The number of persons eligible to receive Medicaid benefits may grow more slowly or even decline if economic conditions continue to improve. Therefore, improvements in general economic conditions may cause our membership levels to decrease, thereby causing our operating results to suffer, which could lead to decreases in our stock price during periods in which stock prices in general are increasing.

Negative publicity regarding the managed care industry may harm our business and operating results.

      In the past, the managed care industry has received negative publicity. This publicity has led to increased legislation, regulation, review of industry practices and private litigation in the commercial sector. These factors may adversely affect our ability to market our services, require us to change our services and increase the regulatory burdens under which we operate, further increasing the costs of doing business and adversely affecting our operating results.

If state regulators do not approve payments of dividends and distributions by our affiliates to us, our liquidity could be materially impaired.

      We operate principally through our health plan subsidiaries. These subsidiaries are subject to laws and regulations that limit either the amount of dividends and distributions that they can pay to us or the amount of fees that may be paid to affiliates of our health plan subsidiaries without prior approval of, or notification to, state regulators. The discretion of the state regulators, if any, in approving or disapproving a dividend is not clearly defined. Health plans that declare non-extraordinary dividends must usually provide notice to the regulators in advance of the intended distribution date of a non-extraordinary dividend. The aggregate amounts our Florida health plan subsidiaries could have paid us at December 31, 2001, 2002 and 2003 without approval of the regulatory authorities were $0, $2,215,000 and $568,000, respectively, assuming no dividends had been paid during the respective calendar years. No dividends were available to be paid from our New York and Connecticut health plan subsidiaries during those years. None of our health plan subsidiaries paid any dividends during 2001, 2002 or 2003. Moreover, the proposed increase in reserve requirements in New York may further hinder the ability of our New York managed care plan to pay dividends. If the regulators were to deny or significantly restrict our subsidiaries’ requests to pay dividends to us or to pay fees to the affiliates of our health plan subsidiaries, the funds available to our company as a whole would be limited, which could harm our ability to implement our business strategy. For example, we could be hindered in our ability to make debt service payments on amounts drawn from our credit facilities.

Recently enacted changes in securities laws and regulations are likely to increase our costs.

      The Sarbanes-Oxley Act of 2002, which became law in July 2002, as well as new rules subsequently implemented by the Securities and Exchange Commission, have required changes in some of our corporate governance practices. In addition, the New York Stock Exchange has recently adopted revisions to its requirements for listed companies. We expect these new rules, and interpretations of these rules, to increase our legal and financial compliance costs, and to make some activities more difficult, time consuming and/or costly. We also expect these new rules to make it more difficult and expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These new rules could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee, and executive officers.

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Risks Related to this Offering

Volatility of our stock price could adversely affect stockholders.

      The market price of our common stock could fluctuate significantly as a result of:

      Investors may not be able to resell their shares of our common stock following periods of volatility because of the market’s adverse reaction to that volatility. Our stock may not trade at the same levels as the stock of other healthcare companies, and the market in general may not sustain its current prices.

Future sales, or the availability for sale, of our common stock may cause our stock price to decline.

      In connection with this offering, we, along with our executive officers, directors and certain of our stockholders, have agreed, subject to limited exceptions, not to sell or transfer any shares of common stock for 90 days after the date of the offering without the underwriters’ consent. However, the underwriters may release these shares from these restrictions at any time. In evaluating whether to grant such a request, the underwriters may consider a number of factors with a view toward maintaining an orderly market for, and minimizing volatility in the market price of, our common stock. These factors include, among others, the number of shares involved, recent trading volume and prices of the stock, the length of time before the lock-up expires and the reasons for, and the timing of, the request. In addition, in connection with our initial public offering, certain of our stockholders agreed not to sell or otherwise dispose of any shares of common stock for a period of 180 days after June 30, 2004. Morgan Stanley & Co. Incorporated, on behalf of the underwriters in the initial public offering, has agreed to release some of these stockholders from those lock-up agreements upon the date of this prospectus, at which time approximately 77,777 additional shares will be available for sale in the public market. Upon the expiration on December 28, 2004 of the remaining lock-up agreements from our initial public offering, approximately 1,053,437 additional shares will be available for sale in the public market. We cannot predict what effect, if any, market sales of shares held by any stockholder or the availability of these shares for future sale will have on the market price of our common stock.

      A total of approximately 19,802,641 shares of common stock may be sold in the public market by existing stockholders 91 days after the date of this prospectus, subject to applicable volume and other limitations imposed under federal securities laws. Additionally, as of December 16, 2004, we had outstanding options to purchase 2,406,634 shares of our common stock, of which 332,437 were vested, at a weighted average price of

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We have broad discretion to spend the net proceeds of this offering and may spend the proceeds in ways with which you may not agree.

      Our business plan is general in nature and is subject to change based upon changing conditions and opportunities. Our management will retain broad discretion to expend a significant portion of the net proceeds of this offering. Because of the number and variability of factors that will determine the use of these proceeds, our actual allocation of the proceeds may vary substantially from our current intentions. If management fails to use the proceeds effectively, our operating results could suffer. See “Use of Proceeds” for a more detailed description of how management intends to apply the proceeds from this offering.

The concentration of our capital stock ownership upon the completion of this offering will likely limit your ability to influence corporate matters.

      Soros Private Equity Investors LP, or SPEI, owned 60.2% of our outstanding capital stock as of September 30, 2004. Upon completion of this offering, SPEI will beneficially own 43.4% of our outstanding capital stock, or 40.5% if the underwriters exercise their over-allotment option in full. In addition, as of September 30, 2004, our executive officers and directors together beneficially owned approximately 10.0% of our outstanding capital stock (excluding shares owned by SPEI which may be deemed to be beneficially owned by one of our directors). Upon completion of this offering, our executive officers and directors will together beneficially own approximately 8.7% of our outstanding capital stock (excluding shares owned by SPEI which may be deemed to be beneficially owned by one of our directors). The chairman of our board of directors is associated with SPEI. As a result, this director may have the ability to influence our management and affairs and determine the outcome of matters submitted to stockholders for approval, including the election and removal of directors, amendments to our charter, approval of any equity-based employee compensation plan and any merger, consolidation or sale of all or substantially all of our assets.

The concentration of our capital stock ownership, as well as provisions in our charter documents and under Delaware law, could discourage a takeover that stockholders may consider favorable and make it more difficult for you to elect directors of your choosing.

      After completion of this offering, SPEI will beneficially own 16,733,784 shares of our common stock, representing 43.4% of the voting power of our common stock, assuming the underwriters do not exercise their over-allotment option. As a result, it will be difficult for holders of our common stock to approve a takeover of our company, or to approve the election of our directors, without SPEI’s approval.

      In addition, provisions of our certificate of incorporation, bylaws and provisions of applicable Delaware law may discourage, delay or prevent a merger or other change in control that a stockholder may consider favorable. These provisions could also discourage proxy contests, make it more difficult for you and other shareholders to elect directors of your choosing and cause us to take other corporate actions that you may consider unfavorable.

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FORWARD-LOOKING STATEMENTS

      This prospectus contains forward-looking statements that address, among other things, market acceptance of our products and services, expansion into new targeted markets, product development, sales and marketing strategies, development and maintenance of strategic alliances, technological advancement, use of proceeds, projected capital expenditures, liquidity and availability of additional funding sources. These statements may be found in the sections of this prospectus entitled “Prospectus Summary,” “Risk Factors,” “Use of Proceeds,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Our Business” and in this prospectus generally. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continues” or the negative of such terms or other comparable terminology. Investors are cautioned that matters subject to forward-looking statements involve risks and uncertainties, including economic, regulatory, competitive and other factors that may affect our business. We undertake no obligation beyond that required by law to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

      Actual results may differ from projections or estimates due to a variety of important factors. The expiration, cancellation or suspension of our HMO contracts by the federal or state governments could significantly impair our results of operations. In addition, our results of operations and projections of future earnings depend in large part on accurately predicting and effectively managing health benefits and other operating expenses. A variety of factors, including competition, changes in healthcare practices, changes in federal or state laws and regulations or their interpretations, inflation, provider contract changes, changes in or terminations of our contracts with government agencies, new technologies, government-imposed surcharges, taxes or assessments, reduction in provider payments by governmental payors, major epidemics, disasters and numerous other factors affecting the delivery and cost of healthcare, such as major healthcare providers’ inability to maintain their operations, may in the future affect our ability to control our medical costs and other operating expenses. Governmental action or business conditions could result in premium revenues not increasing to offset any increase in medical costs and other operating expenses. Once set, premiums are generally fixed for one-year periods and, accordingly, unanticipated costs during such periods cannot be recovered through higher premiums. Furthermore, if we are unable to accurately estimate incurred but not reported medical costs, our profitability may be affected.

      Due to these factors and risks, no assurance can be given with respect to our future premium levels or our ability to control our future medical costs.

      From time to time, legislative and regulatory proposals have been made at the federal and state government levels related to the healthcare system, including but not limited to limitations on managed care organizations, including benefit mandates, and reform of the Medicaid and Medicare programs. Such legislative and regulatory action could have the effect of reducing the premiums paid to us by governmental programs or increasing our medical costs. We are unable to predict the specific content of any future legislation, action or regulation that may be enacted or when any such future legislation or regulation will be adopted. Therefore, we cannot predict accurately the effect of such future legislation, action or regulation on our business.

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USE OF PROCEEDS

      We will receive approximately $44.9 million in net proceeds from the sale by us of 1,500,000 shares of common stock in this offering, at an offering price of $32.00 per share and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We will not receive any of the proceeds from the sale of shares by the selling stockholders.

      We have no immediate need for the proceeds we will receive from this offering. We expect to use the net proceeds from this offering to provide additional long-term capital, in the form of unrestricted cash, to support the growth of our business by providing us with financial flexibility. We may use a portion of the net proceeds from this offering to pursue acquisitions and expansions of health plans and contracts for government-sponsored health programs in existing and new markets or to acquire or invest in complementary businesses. We currently have no agreements with respect to any such acquisition or investment, although we periodically engage in discussions regarding various types of transactions.

      As of the date of this prospectus, we have not identified the particular uses for the net proceeds to be received upon the completion of this offering. The amounts and timing of our actual expenditures will depend on numerous factors, including the status of our market expansion efforts, sales and marketing activities, amount of cash generated or used by our HMO operations, and competition. Accordingly, our management will have broad discretion in the application of the net proceeds, and investors will be relying on the judgment of our management regarding the application of the proceeds of this offering.

      Pending the uses described above, we intend to invest the net proceeds in short-term, interest-bearing, investment-grade securities.

PRICE RANGE OF COMMON STOCK

      Our common stock has been listed for trading on the New York Stock Exchange under the symbol “WCG” since our initial public offering on July 1, 2004. Prior to that time there was no public market for our common stock. The following table sets forth the high and low closing sales prices of our common stock, as reported on the New York Stock Exchange, for each of the periods listed.

The last reported sale price of our common stock on the New York Stock Exchange on December 16, 2004 was $33.12 per share. As of December 16, 2004, we had approximately 56 holders of record of our common stock, including record holders and individual participants in a security position listing.

DIVIDEND POLICY

      We have never paid cash dividends on our common stock. We currently intend to retain any future earnings to fund the development and growth of our business, and we do not anticipate paying any cash dividends in the future.

      Our ability to pay dividends is dependent on our receipt of cash dividends from our subsidiaries. Laws of the states in which we operate or may operate, as well as requirements of the government-sponsored health programs in which we participate, limit the ability of our subsidiaries to pay dividends to us. In addition, the terms of our credit facility and other indebtedness limit our ability to pay dividends. Any future determination to pay dividends will be at the discretion of our board of directors and will depend upon, among other factors, our results of operations, financial condition, capital requirements and contractual restrictions.

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CAPITALIZATION

      The following table sets forth our capitalization as of September 30, 2004. We present capitalization on an actual basis and as adjusted to give effect to our receipt of the estimated net proceeds from the sale by us of 1,500,000 shares of common stock offered in the offering at an offering price of $32.00 per share, after deducting underwriting discounts and commissions and estimated offering expenses.

     Our capitalization information represented above excludes:

      We have considered the dilutive effect of the sale of the 1,500,000 shares of common stock we are offering and do not believe that the impact is significant.

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SELECTED CONSOLIDATED AND COMBINED FINANCIAL DATA

          You should read the following selected financial data in conjunction with our financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus. We derived the combined statements of operations data for the years ended December 31, 1999 and 2000 and the balance sheet data as of December 31, 1999 and 2000 from the unaudited financial statements of our Predecessor. We derived the combined statements of operations for the year ended December 31, 2001, and the seven-month period ended July 31, 2002, and the balance sheet data as of December 31, 2001 from the audited financial statements of our Predecessor. We derived the consolidated statements of operations data for the five-month period ended December 31, 2002 and the year ended December 31, 2003, and the balance sheet data as of December 31, 2002 and 2003, from our audited consolidated financial statements. We derived the consolidated statements of operations data for the nine-month period ended September 30, 2003 and 2004, and the balance sheet data as of September 30, 2003 and 2004, from our unaudited consolidated financial statements. Operating results for the nine months ended September 30, 2004 are not necessarily indicative of operating results to be expected for the full year.

          Our acquisition of the WellCare group of companies as of July 31, 2002 was accounted for using the purchase method of accounting, as described in Note 2 to our consolidated and combined financial statements included elsewhere in this prospectus. Accordingly, the combined results of operations and financial condition at dates prior to July 31, 2002 are not comparable to the consolidated results of operations and financial condition after that date.