Elevance Health Inc.

ELV · NYSE · USD

Will Medicaid rates catch up to medical costs fast enough for the 2026 margin low to hold, and can Carelon and Medicare replace the membership the company is deliberately shedding?

Last 4 earnings calls · through Q2 FY2026

Bull case

  • Medicaid margin recovery path

    The bull case rests on Medicaid margins having bottomed, with state rates catching up to cost trends and the company's care-management actions maturing.

  • Medicare Advantage repositioning

    Portfolio exits in Medicare Advantage and Medicaid are expected to lift margins, on the view that the members and markets dropped were the least profitable ones.

  • Carelon external sales growth

    Carelon is winning large external clients for pharmacy and specialty care, giving the company a growth source that does not depend on its own health plan enrollment.

  • Diversified earnings base

    Management expects earnings growth to resume from several independent levers rather than one recovery, which it argues makes the outlook less dependent on any single business.

Bear case

  • Medicaid rate and acuity gap

    The bear case argues Medicaid rates will keep lagging medical costs because state budgets are strained, so the margin recovery management promises keeps being pushed later.

  • Shrinking risk membership

    Deliberate exits from unprofitable Medicare, Medicaid and employer accounts shrink revenue, and the bear case doubts the remaining book earns enough to offset that loss.

  • Policy-driven enrollment risk

    Federal policy is the swing factor, with expiring ACA subsidies and new Medicaid work requirements threatening both enrollment and the health of the risk pool.

  • Thin consolidated margins

    Even after the repositioning, consolidated operating margins are thin, so small errors in pricing medical costs can move earnings sharply.

Bull and bear points

Growth & Execution

In short: Carelon grows through outside clients, while Medicare and Medicaid membership losses shrink the revenue base.

Bull · 2

  • Carelon sales to outside clients run ahead of plan

    Carelon's pharmacy and services businesses are winning large employers who are not Elevance members, which reduces reliance on its own health plan enrollment for growth.

    Q1 FY2026 call

  • Full-year earnings guidance has been raised twice

    Higher guidance after the first and second quarters reflects claims experience better than the company assumed and cost actions that are starting to show in results.

    Tone shiftQ4 FY2025 → Q2 FY2026
Bear · 2

  • Medicare Advantage membership now falls by a high-teens percentage

    What began as exits from a limited number of service areas has become a much larger membership reduction, taking revenue out of the Medicare business.

    Tone shiftQ3 FY2025 → Q4 FY2025

  • Total revenue growth slowed to 1.4% in the latest quarter

    Membership losses in Medicaid and Medicare now offset premium increases, so the company is no longer growing revenue at the double-digit pace of recent years.

    Filed financials

Profitability & Financial Strength

In short: Cash generation is strong and the balance sheet holds net cash, while Medicaid margins remain negative.

Bull · 2

  • Free cash flow rose to $6.5 billion over twelve months

    Cash generation improved sharply from the prior year, giving the company room to fund Carelon investments and share repurchases without adding debt.

    Filed financials

  • Management now commits to a specific 2027 growth rate

    A year ago the company described 2027 only as a return to a balanced growth profile; it now says it expects at least 12% adjusted earnings growth off the 2026 baseline.

    Tone shiftQ3 FY2025 → Q2 FY2026
Bear · 2

  • Operating margin is 2.5% and slightly below last year

    With so little operating profit per dollar of revenue, small increases in medical costs or unexpected utilization swings take a large share of earnings.

    Filed financials

  • Medicaid is expected to lose money again this year

    Management guides the Medicaid segment to a negative operating margin for the full year, and that recovery depends on state rate increases arriving on the timetable it assumes.

    Q2 FY2026 call

Market Position

In short: Star ratings and commercial retention are improving, while federal and state rules set much of revenue.

Bull · 2

  • More Medicare members sit in four-star plans for 2027

    Higher star ratings bring bonus payments that fund benefits and protect margins, and the company expects about 55% of Medicare Advantage members in four-star or higher contracts.

    Q3 FY2025 call

  • Large-employer renewals stay near full retention

    Keeping almost every national account and winning new business through the second-bid process gives the fee-based commercial business a stable base while other segments shrink.

    Q1 FY2026 call
Bear · 1

  • A $935 million risk-adjustment accrual drew CMS scrutiny

    The company set aside this amount for historical risk-adjustment submissions after a CMS notice; the matter is now closed but shows exposure to audits of prior coding.

    Q1 FY2026 call