Elevance Health Hit By Medicaid Troubles, Trims Outlook

Elevance Health Inc. (NYSE:ELV) shares plummeted nearly 12% on Thursday after the health insurer reported second-quarter 2025 adjusted earnings that missed analyst expectations and significantly lowered its full-year guidance, overshadowing strong revenue growth.

The company reported second-quarter 2025 revenues of $49.42 billion, up 14.3% year over year, higher than the consensus of $48.34 billion. 

The increase was driven by higher premium yields in the Health Benefits segment, recently closed acquisitions, and growth in Medicare Advantage membership, partially offset by membership attrition in the Medicaid business.

Also Read: UnitedHealth, Centene Hit Hard By Guidance Shock, Trump’s Medicaid Push

Elevance Health reported adjusted earnings of $8.84 per share, missing the consensus of $9.20.

The benefit expense ratio was 88.9%, an increase of 260 basis points year over year, reflecting higher medical cost trend primarily in Medicaid business and ACA health plans.

The operating expense ratio was 10.1 percent, an improvement of 160 basis points. The adjusted operating expense ratio was 10%, an improvement of 140 basis points, primarily driven by expense leverage associated with growth in operating revenue and ongoing expense discipline as the company prioritizes investments to support long-term strategy.

Health Benefits segment operating revenue was $41.6 billion in the second quarter of 2025, up 12% compared to the prior year quarter, driven primarily by higher premium yields, recently closed acquisitions, and growth in Medicare Advantage membership, partially offset by lower Medicaid membership.

Medical membership totaled approximately 45.6 million, a decline of 212 thousand from the first quarter of 2025, driven by lower Medicaid membership and attrition resulting from lower effectuation rates in Individual ACA business.

Operating revenue for Carelon was $18.1 billion, up 36%, driven by recent acquisitions in home health and pharmacy services, growth in CarelonRx product revenue, and the scaling of risk-based capabilities in Carelon Services.

Guidance

Elevance Health lowered its fiscal year 2025 adjusted earnings guidance from $34.15-$34.85 per share to approximately $30, versus the consensus of $34.40.

“We are updating our outlook to reflect elevated medical cost trends in ACA and slower rate alignment in Medicaid. While the external environment continues to evolve, we are focused on the areas within our control – managing healthcare costs, deploying targeted investments in advanced technology and value-based care delivery, and reinforcing the operational foundation that supports long-term value creation,” said Gail Boudreaux, President and CEO, in a statement on Thursday.

Industry Context and Peer Impact

This guidance shock from Elevance Health follows a similar move by Centene Corp (NYSE:CNC). Centene recently withdrew its entire 2025 GAAP and adjusted diluted EPS guidance. This decision by Centene was prompted by its initial review of 2025 industry data from Wakely, an independent actuarial firm.

Centene’s analysis indicated lower-than-anticipated market growth and significantly higher implied market morbidity (prevalence of illness) in their Health Insurance Marketplace states, leading to a substantial reduction in their expected risk adjustment revenue transfer.

These events highlight a broader industry concern among health insurers regarding elevated medical costs and challenges in accurately predicting risk and pricing in government-sponsored programs like Medicaid and the ACA.

Price Action: ELV stock is trading lower by 11.8% to $303.92 at last check Thursday.

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