Elevance Health Inc.
Analysis
Elevance spent four calls shrinking itself on purpose — exiting Medicare plans, Medicaid states and unprofitable employer accounts — to rebuild margins. 2026 is the reset year, and everything now rides on the promised return to at least 12% EPS growth in 2027. How much of Elevance's 2027 growth rests on Medicaid rates catching up?
- A deliberately pruned 2026 plan is beating management's own numbers.
In January, 2026 was guided to at least $25.50 with revenue falling. Two raises later it sits at $27, helped by a $935m CMS dispute that closed with no penalty — and by management setting a bar it can clear. How much of the two guidance raises came from one-off items, not the business?
- Elevance is shrinking on purpose to protect its margins.
Medicare Advantage membership falls in the high teens, employer-group risk in the high single digits, and unprofitable Medicaid markets are being exited, D.C. first. Revenue falls this year, and that is the trade management chose.
- Medicaid is the hole, and management says 2026 is its bottom.
Rates have trailed a sicker, costlier membership for two years, and the full-year Medicaid margin still lands near minus 1.75% despite better-than-planned July rates. The 2027 case rests on those rates catching up and cost actions maturing. What has to happen for Medicaid margins to reach the 2% to 4% target?
- Medicaid rate updates keep landing above plan. States are slowly paying for care already delivered, so each step closes the biggest loss without adding a member.
- Medicare Advantage holds the 2% margin management promised. The plans kept are the profitable ones, so the business can grow again instead of paying for members it cannot afford.
- Carelon wins more outside clients than it loses inside ones. Selling care services to other insurers lets profit grow even while Elevance's own health plans get smaller.
- Medicaid rates keep falling short of what care actually costs. The loss runs past 2026 and the promised jump in 2027 slips, which puts the whole forecast in doubt.
- The revamped Medicare and ACA books cost more than priced. Elevance would have to raise prices again and lose more members, the exact cycle it spent two years breaking.
- Exits shrink the health plans Carelon sells into. Carelon must replace lost internal customers before it can grow, so its profit stalls while it waits.
| Politician | Transaction | Amount | Traded | Filed |
|---|---|---|---|---|
Donald Trump Republican · Executive | Sale | ≥$15K | Mar 18 | May 13 |
Donald Trump Republican · Executive | Sale | ≥$250K | Mar 17 | May 13 |
Ro Khanna Democratic · House · CA-17 | Sale | ≥$1K | Jul 20 | Aug 7 |
Alan Armstrong Republican · Senate · OK | Purchase | ≥$1K | Mar 27 | Jul 21 |
Ro Khanna Democratic · House · CA-17 | Purchase | ≥$1K | May 15 | Jun 9 |
Congressional trading data provided by QuiverQuant
How Elevance Health turned $199B of revenue into $7.2B of operating income.
| Revenue | ||
|---|---|---|
| Health Benefits Segment | $167B | ▲ 11.19% YoY |
| Carelon Services Segment | $71.7B | ▲ 33.00% YoY |
| Total revenue | $199B | |
| Operating income | $7.2B | 3.6% |