Elevance Maintains Outlook Despite Industry Concerns Over Medicare Advantage Costs

Elevance Health, one of the largest health insurers in the United States, has reaffirmed its 2025 earnings guidance despite growing industry concerns over rising Medicare Advantage (MA) costs. This reassurance comes in the wake of UnitedHealth Group's recent report of unexpectedly high medical spending in its MA plans, which triggered a sell-off in health insurer stocks.

Q1 Financial Performance and MA Utilization

Elevance reported mixed results for the first quarter of 2025, with revenue of $48.9 billion, up 15% year over year, surpassing Wall Street expectations. However, profit declined 3% to $2.2 billion compared to the same period last year. The company's stock saw a slight increase in morning trading following the announcement.

CEO Gail Boudreaux addressed investor concerns about MA utilization, stating, "We came into the year very respectful of the environment and had planned — and are seeing — an elevated season but feel that we've accounted for that." Unlike UnitedHealth, which reported MA care activity growing at twice its expected rate, Elevance maintains that its MA spending remains in line with expectations.

Strategic Focus on Medicaid and ACA Coverage

Elevance is actively working to mitigate challenges in its Medicaid business, seeking increased payment rates from states following the post-pandemic eligibility redeterminations that led to millions losing coverage. Felicia Norwood, head of Elevance's Medicare and Medicaid businesses, noted progress in rate renewals for January and April, with discussions ongoing for July renewals.

The insurer has also expanded its presence in the Affordable Care Act (ACA) marketplace, entering Florida, Maryland, and Texas in 2025. Elevance reported nearly 5.1 million ACA members at the end of Q1, up from 5 million at the end of 2024. However, CFO Mark Kaye cautioned that member effectuation rates are "tracking a little bit lighter" than expected, projecting a mid-single-digit percentage membership attrition in Q2.

Carelon Growth and Overall Membership

Elevance's health services division, Carelon, showed strong performance with revenue of $16.7 billion, up 38% year over year, partly due to the acquisition of home health company CareBridge. Carelon's operating income increased by 34% to $1.1 billion.

Overall, Elevance ended the quarter with 45.8 million members, a modest increase of 99,000 from the end of 2024. The company's health benefits division reported operating revenue of $41.4 billion, up 11% year over year, with operating profit down 4% to $2.2 billion.

As the pharmaceutical and healthcare landscape continues to evolve, Elevance's ability to navigate challenges in Medicare Advantage and capitalize on opportunities in Medicaid and ACA markets will be crucial for maintaining its competitive position in the industry.