Quarterly Miss Spurs Stock Drop Amid Medicaid Concerns
Shares of Elevance fell over 11% on Thursday after the health insurer missed Wall Street earnings estimates and sharply reduced its annual profit forecast. The company cited rising medical costs in both Medicaid and Affordable Care Act (ACA) plans as key pressures, joining other major insurers in sounding the alarm over elevated healthcare spending in government-backed programs.
Elevance now expects full-year adjusted earnings of about $30 per share, down from its previous guidance of $34.15 to $34.85. The miss and forecast revision reflect continued headwinds as the company navigates unpredictable reimbursement structures and regulatory shifts.
Rising Costs in ACA and Medicaid Drive Losses
The insurer flagged higher-than-expected utilization in its Obamacare and Medicaid segments, a trend echoed recently by peers UnitedHealth, Centene, and Molina Healthcare. In the second quarter, Elevance reported a medical loss ratio of 88.9%, slightly above analyst expectations of 88.7%. For the full year, the ratio is projected to hit 90%, signaling continued pressure on margins.
CFO Mark Kaye warned that changes under the Trump administration’s proposed Medicaid work requirements, part of the One Big Beautiful Act, could skew Elevance’s patient mix toward higher-risk individuals. Despite the uncertainty, the company plans to collaborate with states to maintain access to care for low-income populations.
Policy Shifts and Tax Credit Expiry Add Instability
Investors are closely watching the expiration of pandemic-era premium tax credits in 2026, which could reduce enrollment in ACA plans. Analyst Julie Utterback from Morningstar said Elevance may opt to increase premiums in 2026 to protect margins rather than pursue price competition. However, ongoing utilization spikes could pressure pricing decisions.
Daniel Barasa of Gabelli Funds, a shareholder in Elevance, noted that government-sponsored plans such as Medicare, Medicaid, and ACA remain challenging to price due to mismatches between healthcare costs, reimbursement rates, and regulatory changes. He warned that the environment may become more unpredictable going forward.
Industry-Wide Impact Hits Healthcare Stocks
The health sector reacted broadly to Elevance’s results, with shares of UnitedHealth, Centene, Molina, CVS Health, and Cigna falling between 1% and 2%. While Wall Street analysts anticipated a guidance cut, the magnitude of Elevance’s revision raised concerns about the sustainability of earnings across the managed care industry.
Despite acknowledging the volatility, Elevance emphasized it would focus on what it can control, including trend stabilization and pricing realignment. Kaye reiterated the company’s commitment to long-term sustainability, even as external pressures mount.