MW Medicaid, ACA costs will keep rising - and this insurer's stock is tumbling

By Tomi Kilgore

Elevance's stock led the S&P 500's losers after its CEO said a lowered profit outlook assumes Medicaid cost pressures won't subside in the near term

Shares of Elevance Health Inc. tumbled toward a more than four-year low Thursday, after the health insurer slashed its full-year profit outlook and said pressures from rising Medicaid and Obamacare costs aren't expected to be lifted anytime soon.

The company - the parent of the Anthem, Wellpoint and Carelon health-services companies - also missed second-quarter profit expectations for the third time in the past four quarters, even as revenue rose above forecasts.

The stock (ELV) sank 11.2% in afternoon trading, enough to pace the S&P 500 index's SPX decliners. That's only the biggest loss since it fell 11.5% on July 2, after fellow Medicaid provider Centene Corp. $(CNC.UK)$ withdrew its full-year financial outlook, saying previous cost estimates were way off.

Elevance's selloff was also hurting shares of its peers Thursday, as Centene shed 3.7%, Molina Healthcare Inc. $(MOH.AU)$ slid 4.1% and UnitedHealth Group Inc. (UNH) lost 1.3%.

Elevance said it now expects 2025 adjusted earnings per share, which excludes nonrecurring items, of $30.00, compared with previous guidance of $34.15 to $34.85. It cited the ongoing and industrywide impact of higher costs in the Affordable Care Act, also known as Obamacare, and Medicaid services.

Chief Executive Gail Boudreaux said on a postearnings call with analysts that Elevance decided to cut the outlook because the issues are expected to continue.

"Importantly, this decision is anchored in our view that the elevated trends we are now observing will persist and reflects our updated visibility into the second half of the year," Boudreaux said, according to a FactSet transcript. "It is not based on assumptions of a near-term recovery."

Elevance's comments only heightened investor concerns over rising costs seen after UnitedHealth cut its full-year outlook in mid-April and then pulled its guidance in mid-May.

Mizuho analyst Ann Hynes said it could take two or three Medicaid rate cycles for rates to fully capture current trends.

"We believe there is path to the recovery, but likely full margin recovery could be in 2027 or 2028," Hynes wrote in a note to clients.

On Thursday, Elevance said its second-quarter benefit-expense ratio, which compares insurance premiums received with money spent on coverage - lower is better for companies - rose to 88.9% from 86.3%, topping the average analyst estimate compiled by FactSet of 88.8%.

Net income fell 24.2% from the same period a year ago to $1.74 billion, while adjusted EPS declined to $8.84 from $10.30 and missed the FactSet consensus of $8.91. That marked the third time in the past four quarters that Elevance missed bottom-line expectations.

Meanwhile, total revenue grew 13.4% to $49.78 billion, above expectations of $49.42 billion, as higher premium yields in the health-benefits business, recently closed acquisitions and growth in Medicare Advantage membership offset Medicaid membership losses.

Elevance's stock has dropped 17.1% in 2025, while the Health Care Select Sector SPDR ETF XLV has declined 3.7% and the S&P 500 index SPX has gained 6.9%.

-Tomi Kilgore

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July 17, 2025 13:57 ET (17:57 GMT)

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