Elevance CFO: 2026 Should Mark ‘The Trough’ For Medicaid Margins
Elevance Health Inc. leaders said this week that acuity and utilization trends in the company’s Medicaid plans have stayed above historical levels and will eat into profits in 2026. But they also said they expect next year to mark a cyclical bottom in the insurance business.
Indianapolis-based Elevance, which runs the Anthem and Wellpoint insurance businesses as well as the Carelon pharmacy benefit and health services group, said Oct. 21 that the third-quarter operating income from its health benefits group fell to $601 million from $1.6 billion in last year’s Q3 in large part because of higher medical trends. President and CEO Gail Boudreaux and CFO Mark Kaye three months ago highlighted cost pressures in their Health Insurance Marketplace and Medicaid businesses and said they expected a “meaningful Q4 surge” in part because of the expected end of some coverage tax credits.
After he and Boudreaux reported Elevance’s third-quarter results of nearly $1.2 billion in net income on total revenues of $50.7 billion, Kaye said those dynamics haven’t substantively changed since July. Elevance’s $56 billion Medicaid business, he said, is now on track to post a “modestly negative” operating margin this year and—because rates haven’t yet been able to catch up to the higher cost trends—fall 1.25 percentage points in 2026.
The silver lining: That might be as bad as it gets for a while.
“We do view 2026 as the trough, not the beginning of another reset period,” Kaye said on a conference call with analysts. “The actions we are taking will position us to improve through the cycle as we ultimately target that 2 percent to 4 percent margin range over time.”
Felicia Norwood, Elevance’s president of government health benefits, said on the conference call that her team is seeing “greater receptivity” from state officials both about increasing payments and adjusting their program structures.
“One of the things that we’ve been doing is providing them with options around the levers that they have that can certainly address some of the program changes that are increasing costs and utilization in the program,” Norwood said. “For example, we’ve seen increases in certain categories of services, things like [applied behavioral analysis and] changes that we can make with respect to GLP-1s and other things that have driven up costs. But the conversations this time around have certainly not just been about rates.”
Shares of Elevance (Ticker: ELV) fell a little more than 1 percent to roughly $350 after executives’ earnings report and call commentary. Over the past six months, they have fallen about 17 percent, which has cut the company’s market capitalization to about $77 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.