Elevance Health execs expect Medicaid costs to rise in 2026

UPDATED: Tuesday, Oct. 21 at 5 p.m. ET

Elevance Health executives warned investors about challenges in the Medicaid market during the company's earnings call on Tuesday.

CEO Gail Boudreaux said that ongoing eligibility determinations as well as changes to state programs are increasing the acuity of its membership. The company is bracing for a decline of 125 basis points year over year in its Medicaid margins for 2026 amid this acuity trend as well as ongoing elevated utilization.

"This is an initial input at this early stage, not formal guidance," Boudreaux said.

She said the team is working closely with states to align rates and offer recommended program improvements. Elevance Health is also working to expand behavioral healthcare access, tackle specialty pharmacy and manage sites of care to address the cost issues.

Chief Financial Officer Mark Kaye said that disenrollments in Elevance's Medicaid plans are largely among lower acuity enrollees, playing into that broader trend. He said the higher-than-expected utilization and member acuity were not offset by the insurer's updated rates.

"While next year will reflect challenging Medicaid dynamics, membership changes and disciplined investment, we expect 2027 to mark a return to a more balanced earnings growth profile," Kaye said.

The comments came as Elevance Health kicked off another round of earnings reports for major insurers Tuesday morning, posting double-digit year-over-year growth for both revenue and profits.

The company reported $1.2 billion in profit for the third quarter, up 17% from the $1 billion haul in brought in for the third quarter of 2024. Revenues for the quarter were $50.7 billion, an increase of 12.4% from the $45.1 billion reported in the prior-year quarter.

The results surpassed Wall Street's forecasts on both earnings and revenue, per Zacks Investment Research.

Through the first nine months of the year, Elevance Health has brought in $5.1 billion in profit, down 8% compared to the $5.7 billion in earnings reported through the first three quarters of 2024.

Revenues across the first three quarters of 2025 were $149.4 billion, according to the earnings report, an increase of 13.5% year over year.

"Our third quarter results were in line with expectations and reflect disciplined execution across Elevance Health," Boudreaux said in a press release. 

"In a dynamic healthcare environment, we’re focused on advancing affordability and elevating the member experience through our growing value-based care partnerships and AI-enabled digital solutions that simplify access and improve outcomes," she said. "As we plan for 2026, we remain disciplined in managing what we can control—positioning our businesses for long-term, sustainable growth and value creation for all stakeholders."

Elevance Health said operating revenue at its health benefits unit was $42.2 billion in the third quarter, which reflects higher premium yields, a bump from recently closed acquisitions and growth in its Medicare Advantage segment.

The insurer's medical loss ratio in the quarter was 91.3%, due in large part to ongoing cost trends in Medicare. Elevance particularly highlighted Part D as a factor in the third quarter, noting "pronounced seasonality in Part D benefits associated with changes made in the Inflation Reduction Act."

It reported 45.4 million members as of the third quarter, down slightly year over year. Elevance said in the press release that the decline was driven by lower Medicaid and Blue Card membership compared to the prior-year quarter.

At its Carelon division, meanwhile, operating revenue was up 33% year over year, reaching $18.3 billion. The company said this growth comes on the back of acquisitions in the home health and pharmacy spaces as well as growth in product revenue at CarelonRx.

Due to the results, Elevance Health reaffirmed its 2025 outlook. The company expects to bring in $30 in earnings per share and for its full-year medical loss ratio to be approximately 90%.

Shares in Elevance Health were up premarket, with the results lifting some of its competitors as well before market open. It ended Tuesday down about 1% from its opening price.