Oct. 30 (Bloomberg) -- WellCare Health Plans Inc., the health insurer under U.S. investigation, fell 23 percent in New York trading after a Florida agency blocked it from expanding Medicaid offerings in the state.

The Tampa, Florida-based company has dropped 82 percent, eliminating $4.1 billion in market value, in the week since FBI agents and investigators from the Florida attorney general's Medicaid fraud unit searched WellCare's headquarters.

The Florida Agency for Health Care Administration prohibited WellCare from moving into new areas of the state as a ``precautionary'' measure because of the investigations, the agency said yesterday in a statement. The curb on expansion is likely to allow competitors to gain market share, analysts at Deutsche Bank said today in a research note.

``The raid was exquisitely timed for maximum pain,'' just before the open-enrollment season for WellCare's health plans for the elderly, said Sheryl Skolnick, an analyst with CRT Capital Group in Stamford, Connecticut in a phone interview. ``Many seniors will make the choice to go with another plan just to make sure they have consistent coverage throughout the year.''

WellCare plummeted $6.58 to $22.04 at 4 p.m. in New York Stock Exchange composite trading.

The company provides health coverage solely through government-sponsored programs. Its business is divided about evenly between Medicare, the U.S. program for the elderly and disabled, and Medicaid, the U.S.-state plan for the poor.

Additional Probes

The FBI and state authorities haven't disclosed the objective of their search of WellCare's offices. Officials from the Connecticut attorney general's office and the U.S. Securities and Exchange Commission also are reviewing the company.

``I am somewhat surprised to see the stock trading where it is,'' said Thomas Carroll, an analyst with Stifel Nicolaus & Co. in Baltimore, in a telephone interview today. ``I didn't think it would get this low. The worst-case scenario is that existing contracts are sold off to other competitors, a different management team comes in or someone buys it.''

John Aberg, a WellCare spokesman, didn't respond to a request for comment.

The company's board of directors formed a special committee to deal with the investigations.

$700 Million

WellCare provides benefits under Medicaid to 356,000 of Florida's 2 million recipients, more than any other company. The state expects to pay WellCare more than $700 million this year, said Fernando Senra, a spokesman for the Florida agency.

The chief of the state's Medicaid program is Andrew Agwunobi, a former WellCare board member.

``We are continuing to work with WellCare as a partner in Florida's Medicaid program,'' Agwunobi said in the statement. ``However, in light of the actions by the Department of Justice and the office of Florida's attorney general, I have asked agency staff to take precautionary measures to prepare for all eventualities.''

The company's pending application to offer coverage to recipients in seven more low-population counties will be put on hold, Senra said. Most of WellCare's existing Florida Medicaid service areas are urban.

Medicaid will ``be on alert'' for any increase in complaints about existing operations, the agency said.

For the quarter ending June 30, the company reported $1.34 billion in revenue and $54.6 million in net profit, up from $22.2 million a year earlier.

WellCare has a total of 1.18 million Medicaid members in Florida, New York, Connecticut, Illinois, Missouri, Ohio and Georgia, according to a company filing.

About 155,000 people in Medicare, the U.S. plan for the elderly and disabled, use WellCare as their managed-care provider through the Advantage plans this year, the company said. An additional 971,000 senior citizens nationwide chose WellCare for Medicare prescription drug plans.

To contact the reporter on this story: Avram Goldstein in Washington at agoldstein1@bloomberg.net.

Last Updated: October 30, 2007 16:44 EDT