Elevance Health fell in early trading despite raising its full-year earnings outlook, as investors were disappointed by a guidance increase that fell short of Wall Street's expectations amid mounting healthcare cost pressures tied to recent federal policy changes.

The health insurer lifted its forecast for full-year adjusted earnings to at least $27 per share, up from its previous outlook of at least $26.75 per share. Still, the 25-cent increase was smaller than many analysts had anticipated. For the second quarter, Elevance posted adjusted earnings of $7.45 per share, comfortably topping the consensus estimate of $6.18 per share.

The modest guidance increase suggests the company expects profitability to come under greater pressure in the second half of the year. Elevance also reported operating expenses above analysts' forecasts in its second-quarter earnings release issued Wednesday.

Shares of Elevance dropped 7.8% in premarket trading.

As the first major U.S. health insurer to report second-quarter results, Elevance's earnings are viewed as an important indicator for the broader managed-care sector. Insurers across the industry have warned that rising medical costs and inadequate government reimbursement rates are squeezing margins. Wall Street currently expects Elevance's adjusted earnings per share to decline in 2026 for a third consecutive year.

Recent federal reductions in Medicaid funding are also expected to shrink the number of insured Americans. In addition, roughly 4 million people have already lost Affordable Care Act coverage after certain subsidies expired. More than one-quarter of Elevance's revenue comes from Medicaid, while its ACA exchange business remains relatively small.

The policy changes are already affecting healthcare providers. Hospital operator HCA Healthcare lowered its guidance on Tuesday after citing a greater-than-expected impact from cuts to Obamacare coverage.

Meanwhile, insurers expect the remaining insured population to be less healthy on average, leading to higher medical costs. That trend could force health plans to either absorb higher expenses or withdraw certain insurance products.

During the second quarter, Elevance reported membership declines in its Medicare Advantage and Medicaid businesses, in line with expectations, while enrollment in its ACA exchange plans exceeded forecasts. The company also reaffirmed its expectation of returning to at least 12% adjusted EPS growth in 2027, based on a revised 2026 earnings baseline of $26 per share.