Amerigroup Corp.'s (AGP) earnings warning Monday reflects the financial risk that health insurers--especially those focused on the Medicaid population--face from the H1N1 flu virus.

The Virginia Beach, Va., company said it no longer expects to meet its 2009 earnings guidance and warned that third-quarter results will fall far short of Wall Street expectations, mostly because of costs related to the H1N1 virus. Based on claims-paid data through September, Amerigroup said it now estimates third-quarter medical costs will be higher than its previous expectations.

The company said the virus is especially virulent among children, pregnant women and other high-risk population groups, a demographic that represents some 87% of Amerigroup's 1.7 million members, most of whom are enrolled in Medicaid or related programs for low-income or disabled Americans. Amerigroup said it experienced a spike in flu-related activity among its Medicaid members in September.

"The vast majority of our members are within the demographic most at risk for the flu, and we appear to be early in the cycle. With this in mind, it is difficult to determine if, and when, the situation will abate, continue at current trends or worsen," Amerigroup Chairman and Chief Executive James Carlson said in a statement.

Shares of Amerigroup recently lost 3.5% to $21.79.

Treating H1N1 has gotten more complicated as the flu has spread. Last week, President Barack Obama signed an emergency declaration for H1N1, with flu activity reported to be widespread in most states and vaccine distribution slower than anticipated.

Because of the patient population most affected, other Medicaid companies--such as Centene Corp. (CNC), Molina Healthcare Inc. (MOH) and WellCare Health Plans Inc. (WCG)--are vulnerable to higher medical costs. Amerigroup's warning comes when Medicaid managed-care companies are seen as potentially benefiting from efforts in Washington to expand health coverage to the uninsured.

"We expect Medicaid companies will see a greater impact from the flu than either commercial or Medicare populations because the impact of the flu this year is more weighted towards children and pregnant women," Wells Fargo analyst Matt Perry said.

Centene shares recently fell 3.7% to $17.34, Molina dropped 1.9% to $18.78 and WellCare slipped less than 1% to $25.13.

Other managed-care companies, in addition to the Medicaid firms, also are exposed to higher influenza-related medical expenses.

"It seems unlikely that Amerigroup is the only publicly traded health plan that will revise its outlook due to the flu," Stifel Nicolaus analyst Thomas Carroll said. "H1N1 is the primary influenza strain in circulation at this time. We believe that the indeterminable severity of the seasonal flu will dictate if managed care companies face excessive downside."

UnitedHealth Group Inc. (UNH), one of the nation's largest managed-care companies, last week partly blamed the H1N1 virus for higher medical costs as a percentage of premium revenue.

Among the more diversified managed-care companies, Health Net Inc. (HNT) fell 5% to $14.93, Humana Inc. (HUM) slid 3.5% to $36.21, and Aetna Inc. (AET) dropped 3% to $25.27. Cigna Corp. (CI), UnitedHealth and WellPoint Inc. (WLP) each fell between 2% and 3.5%, while Coventry Health Care Inc. (CVH) lost 1.7%.

Possibly contributing to pressure on shares of the major managed-care companies late in the trading day was an announcement from U.S. Senate Majority Leader Harry Reid, (D., Nev.), that the Senate would consider health-care legislation with a public insurance option that includes an "opt out" provision for states. Managed-care players that sell employer and individual plans are vigorously fighting a public health-insurance option.

Amerigroup said Monday that it expects third-quarter per-share earnings between 42 cents and 44 cents, below the average analyst estimate of 57 cents on Thomson Reuters. The company withdrew its 2009 EPS guidance of $2.55 to $2.75, which it had issued last month after lowering the previous full-year guidance.

-By Dinah Wisenberg Brin, Dow Jones Newswires; 215-656-8285;