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Elevance Shares Rise, and Fall, on Earnings. Medicaid Is a Worry.

Oct 21, 2025 10:33:00 -0400 by Josh Nathan-Kazis | #Healthcare #Earnings Report

Elevance Health stock had lost 16% over the past year as of the close on Monday. (Jonathan Weiss / Dreamstime)

Key Points

Shares of the health insurer Elevance Health jumped as much as 7% in the premarket hours on Tuesday after the company reported third-quarter earnings, only to tumble into the red during a morning investor call.

The company reported adjusted diluted earnings of $6.03 per share for the quarter, better than the $4.93 per share consensus estimate. Operating revenue was $50.1 billion, while Wall Street had penciled in $49.3 billion.

The outperformance may not have been as remarkable as it looked, however. Analysts noted that the strong result was attributable in part to a substantial boost from higher-than-expected investment income and tax benefits, which hadn’t been factored into Wall Street’s estimates.

Leerink Partners analyst Whit Mayo said those factors provided a boost of $1 per share to the company’s earnings. “The results are probably in-line” compared to expectations, Mayo wrote.

Shares were still up roughly 2% when an investor call kicked off at 8:30 a.m. Eastern, but fell amid a discussion of the company’s Medicaid business. When an analyst asked if the operating margin for Elevance’s Medicaid business was deteriorating over the course of the year, an Elevance executive affirmed that it was.

“We’ve been very clear today, as I try to think forward a little bit, that the 2026 is going to reflect continued pressures in Medicaid as rates catch up to acuity,” said the company’s CFO, Mark Kaye. “We see 2026 as the low point in the Medicaid margin, and from there we would expect to see sequential improvement through 2027.”

He said he was fairly confident the margins will ultimately return to the 2% to 4% range Elevance targets.

The comments about the 2026 Medicaid outlook appeared to shake investors, and Elevance shares were down 3% after the open.

The earnings, at least at first, appeared significantly better than the company’s second-quarter report in July, when management slashed its forecast of earnings for the full year. That sent shares down 12% on the day.

Elevance stock was down 4% so far in 2025 as of the end of the day on Monday, and had lost 16% over the past 12 months.

Elevance said that its benefit expense ratio, which measures the proportion of premiums paid out to cover medical expenses, was 91.3% for the quarter, better than the 91.7% FactSet consensus estimate. The company said that medical expenses were “elevated, but expected,” and that the higher expenses were mostly seen in the company’s Medicare Advantage business.

Policy uncertainties have shadowed the insurance industry for months. Elevance is at risk of direct effects from the end of the Affordable Care Act marketplace plan subsidies, which could come at the end of the year unless Democrats are able to extract concessions from Republicans in the continuing shutdown negotiations.

On the investor call early Tuesday, Elevance CEO Gail Boudreaux said that the company has planned for its exchange plans to have a higher concentration of sicker patients next year, as is widely expected will be the case if the marketplace subsidies end.

“We are ready and prepared for a range of policy outcomes, including both the renewal and the potential modification of those enhanced subsidies,” Boudreaux said. “If they are extended, we’ll work quickly with regulators and states to ensure a smooth execution.”

Elevance is the first of the health insurers to report its third-quarter earnings. Its results can offer hints about the earnings season to come for larger peers, like UnitedHealth Group and CVS Health , which report next week.

Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com