Elevance making difficult decisions amid healthcare minefield

Elevance Health navigated the healthcare minefields well enough to post a $547 million profit in the fourth quarter of 2025, a 31% increase over the prior-year quarter.

But the health insurer continues to assess its participation in fluctuating Medicaid, Medicare, and Affordable Care Act markets, executives said during a call Wednesday with Wall Street analysts.

“We view 2026 as a year of execution and repositioning,” said Gail Boudreaux, CEO of Elevance. “Across Medicaid, Medicare Advantage and ACA, the dynamics … reflect a combination of policy driven changes and deliberate portfolio and pricing actions designed to strengthen performance consistency, and we are aligning our cost structure and operating priorities accordingly.”

The insurer reported a benefit expense ratio of 93.5% in the fourth quarter, an increase of 110 basis points compared to the prior-year period. Elevance blamed “higher medical cost trend primarily in our Affordable Care Act health plans and heightened Medicare Part D seasonality driven by Inflation Reduction Act changes,” according to a news release.

For the year, the benefit expense ratio was 90%, an increase of 150 basis points year over year, likewise driven by “elevated medical cost trends.”

As a result, full-year 2025 revenues of $197.6 billion, while up 12.8% from 2024, translated to a profit decrease of $6 billion to $5.7 billion.

Elevance executives are focused on returning to profit targets via a disciplined focus on markets that work best for the insurer. Elevance Health reported 45.2 million members as of Dec. 31, down by about 500,000, mostly from Medicaid. The insurer spoke during its third-quarter call about the profit hurdles in Medicare and Medicaid.

“We remain focused on aligning pricing to elevated cost trends, refining our product and investing selectively in capabilities that differentiate our model and support sustainable growth,” said Mark Kaye, chief financial officer.

Like many competitors, Elevance is a vertically integrated health services company seeking to treat patients across multiple service areas. The insurer provides Medicare, Medicaid, and commercial plans under brands like Anthem, Wellpoint, and Amerigroup. Carelon is Elevance’s healthcare services brand and houses its pharmacy benefit manager, CarelonRx, behavioral health services, and clinical care delivery.

In Other News

Medicare Advantage rates. Elevance officials responded to Monday’s announcement by the Centers for Medicare & Medicaid Services to raise MA payment rates by 0.09% in 2027. That proposal falls well below analysts’ expectations of a 4-6% increase, according to the Wall Street Journal.

Last year, the CMS announced a 5.06% increase that will go into effect this year, beating forecasts. The latest minuscule increase comes on the heels of President Donald Trump’s public criticism of insurance companies. The president wants insurers to “make less, a lot less” and added that they are “making so much money.”

“It just doesn’t keep pace with the current medical costs and utilization trends, and that does create real pressure on benefits stability and affordability for seniors,” Boudreaux said. “For MA to remain strong, the program needs to be stable and sustainable, and stability gets undermined when payment rates don’t keep pace with utilization and cost trends, especially as the member needs grow more and more complex.”

Quarterly Snapshot

• Operating revenue for Carelon was $18.7 billion in the fourth quarter 2025, an increase of $3.9 billion, or 27%, compared to the prior-year period.
• Days in claims payable was 41.3 days as of Dec. 31, 2025, a decrease of 0.1 days from Sept. 30, 2025, and a decrease of 1.9 days compared to Dec. 31, 2024.

Management Perspective

“From a profitability perspective, I will say the mix of the lives that we lost was very consistent with our strategy. A majority of the attrition occurred in PPO products, in an HMO product, and geographies where we didn’t offer a comparable alternative, and where we were intentionally disciplined in repositioning our product, vis-a-vis the broader market.”

Felicia Norwood, executive vice president and president of government health benefits, on Medicare annual enrollment period results

By The Numbers

• Operating Revenue: $49.3 billion ($45 billion in Q4 2024)
• Earnings Per Share: $2.47 ($1.81 in Q4 2024)
• Share Repurchases: $471 million in Q4 2025
• Dividend Declared: $1.72 per share
• Stock Price Movement: Shares up more than 7% at midday Wednesday to $346.57

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