Elevance Health Faces Medicaid Issues, Lowers Projections

Elevance Health Inc. Stock Decline

Elevance Health Inc. (NYSE: ELV) saw its stock drop by nearly 12% on Thursday after the company reported adjusted revenues for the second quarter of 2025 that fell short of expectations. This has led to a significant downgrade in the full-year guidance, despite some notable revenue growth.

In its latest earnings report, the company disclosed a revenue of $494.2 billion for the second quarter of 2025, marking a 14.3% increase compared to the same period last year. This figure was above the consensus estimate of $48.34 billion.

The revenue boost was mainly attributed to better premium yields in the Health Benefits division, recent acquisitions, and an increase in Medicare Advantage membership. However, it was somewhat tempered by a reduction in Medicaid membership.

Elevance Health reported adjusted earnings of $8.84 per share, which fell short of the $9.20 consensus. The benefit cost ratio increased to 88.9%, reflecting a 260 basis point rise from the previous year, primarily related to trends within the Medicaid segment and escalating healthcare costs.

The operating expense rate was noted at 10.1%, showing an improvement of 160 basis points. Meanwhile, the adjusted operating expenses ratio was 10%, which is a 140 basis point enhancement, driven largely by increased operating revenue and cost efficiencies.

For the Health Benefits segment, operating revenue was $41.6 billion, up 12% year-over-year. This growth was partly offset by a decrease in Medicaid memberships, alongside gains from Medicare Advantage and premium yield growth.

The total number of medical members was around 45.6 million, which represents a decline of 212,000 from the previous quarter.

Carelon, a subsidiary, reported an operating revenue of $18.1 billion, reflecting a notable 36% increase thanks to recent acquisitions in Home Healthcare and Pharmacy Services and growing revenues in CarelonRX products.

Elevance has adjusted its revenue guidance for 2025, lowering expectations from a range of $34.15 to $34.85 per share down to about $30, whereas the consensus was previously set at $34.40.

In a statement, President and CEO Gail Boudreaux mentioned that they are updating their outlook to reflect rising costs in ACA health plans and adjustments due to slower growth rates in Medicaid. She emphasized the importance of managing healthcare costs and investing in advanced technology and value-based care to sustain long-term growth.

This situation, referred to as a guidance shock, isn’t limited to Elevance health, as Centene Corp (NYSE: CNC) has also made similar adjustments citing low market growth and increased morbidity, which impacts expected revenue transfers.

Concerns in the industry have arisen regarding rising health costs and their implications for accurately predicting risks and pricing in government-sponsored programs like Medicaid and the ACA.