Elevance Health Tumbles After Slashing 2025 Outlook on Medicaid Weakness

Elevance Health (ELV, Financials) shares fell nearly 12% Thursday morning after the health insurer posted weaker-than-expected Q2 earnings and issued a major downgrade to its full-year profit forecast, citing rising medical costs in its Medicaid and ACA businesses.

While revenue grew a strong 14.3% year over year to $49.42 billion, beating expectations, adjusted earnings came in at $8.84 per share, well below Wall Street's forecast of $9.20.

The big issue: medical costs. The company's benefit expense ratio jumped to 88.9%, up 260 basis points from a year ago, driven by higher claims in Medicaid and Affordable Care Act plans. That pressure outweighed improving efficiency, as the operating expense ratio fell to 10.1%, thanks to disciplined cost controls and revenue leverage.

Total medical membership dropped by 212,000 from Q1, with declines in Medicaid and ACA coverage offsetting gains in Medicare Advantage.

Elevance's Carelon business, which includes home health and pharmacy services, was a bright spot revenues surged 36% to $18.1 billion, helped by acquisitions and strong product performance in CarelonRx.

But that wasn't enough to cushion the blow. The company slashed its full-year EPS guidance to around $30, down from its prior $34.15$34.85 range and well below the Street's $34.40 consensus.

We're adjusting our outlook to reflect what we're seeing in Medicaid and ACA, said CEO Gail Boudreaux, adding that Elevance remains focused on managing healthcare costs and making targeted tech investments to support long-term value.