Elevance Executives Brace for ‘Measurable Last-Chance Uptick’ in Q4 Utilization
Executives of Elevance Health Inc. expect “a much more meaningful Q4 surge” in utilization by Health Insurance Marketplace members than in past years due both to higher cost trends—with recent Medicaid redeterminations adding to financial pressures—and the expected loss of some tax credits for coverage.
Speaking to analysts after Indianapolis-based Elevance reported its second-quarter results, President and CEO Gail Boudreaux and CFO Mark Kaye said the parent of the Anthem and Wellpoint insurance organizations as well as the Carelon health services group continues to face cost and activity pressures in its Affordable Care Act and Medicaid businesses. The executives have lowered their earnings outlook for the year and say their new guidance “is not based on assumptions of a near-term recovery.”
Elevance, which finished June with 45.6 million members in its various medical plans, is far from alone in wrestling with higher utilization and acuity trends. Leaders of UnitedHealth Group Inc. and Humana Inc. are among those who have this year said they are seeing plan members use the healthcare system more widely and more expensively.
A case in point for Elevance: Kaye said July 17 that one indicator of “a market-wide morbidity shift” is that newer members of the company’s ACA plans are using the emergency room at nearly double the level of members of its commercial plans. On the Medicaid side, Kaye said Elevance is “experiencing higher acuity resulting from ongoing disenrollment as well as an overall increase in member utilization” and added that his team expects price increases will take a relatively long time to work their way through to the company’s financials.
There’s likely more pain to come for Elevance and its peers active in the ACA market: Kaye said the expected end of enhanced tax credits is very likely to lead to “a measurable last-chance uptick in fourth-quarter utilization” as more members schedule elective care before they face higher out-of-pocket costs next year.
Providers also likely to come under pressure
These dynamics recently led Bank of America analyst Joanna Gajuk to downgrade shares of fellow insurer Centene Corp. and slash her price target to $30 from $52. Gajuk said 2026 is likely to bring great pricing risks “given material shifts in the risk pool” that Elevance executives also called out.
Boudreaux told analysts her team isn’t assuming cost and utilization trends will improve this year. Members’ morbidity rate appears to have stabilized, she said, but the expected late-year spike in activity will bring new question marks.
“We’re not betting on new initiatives to bend the trend or cost curve,” Boudreaux said.
The expected deterioration of the ACA market—Congressional Budget Office analysts have forecasted that the expiration of premium subsidies will grow the number uninsured Americans by about 3.8 million—aren’t good news for providers, either. Alongside her Centene downgrade, Gajuk also cut her rating and price target for shares of HCA Healthcare Inc., saying enrollment drops will likely lead to slower growth and more bad debt.
Elevance’s second-quarter results showed a net profit of $1.74 billion, a 24 percent drop from the same period of last year. Total revenues climbed 13 percent to nearly $50 billion but benefit expense jumped 20 percent, which pushed the company’s benefit expense ratio to 88.9 percent from 86.3 percent in the spring of 2024. The Carelon group, which recently acquired home health venture CareBridge, grew its operating revenue to $18.1 billion from $13.3 billion and pushed its operating gain to about $900 million from roughly $700 million.
Shares of Elevance (Ticker: ELV) tumbled 12 percent on the heels of executives’ earnings report and conference call. Over the past six months, they have lost more than 20 percent of their value, trimming the company’s market capitalization to about $68 billion.
About the Author
Geert De Lombaerde
A native of Belgium, Geert De Lombaerde has more than two decades of business journalism experience and writes about markets and economic trends for Endeavor Business Media publications Healthcare Innovation, IndustryWeek, FleetOwner, Oil & Gas Journal and T&D World. With a degree in journalism from the University of Missouri, he began his reporting career at the Business Courier in Cincinnati and later was managing editor and editor of the Nashville Business Journal. Most recently, he oversaw the online and print products of the Nashville Post for more than a decade and reported primarily on Middle Tennessee’s finance sector as well as many of its publicly traded companies.