Industry Overview - The U.S. healthcare services market is projected to grow from $8.77 trillion in 2024 to $9.25 trillion in 2025, driven by telehealth, digital health, workforce shortages, and changes in reimbursement models [1] - CVS Health and Elevance Health are major players in this competitive market, each with extensive reach and diversified services [1][2] CVS Health Analysis - CVS Health, valued at $90.32 billion, is experiencing revenue growth across all operating segments, with a focus on restoring Aetna to target margins through organizational realignment and technology enhancements [2][3] - The company is enhancing its pharmacy services by acquiring certain Rite Aid pharmacies and implementing a new pharmacy model, CostVantage, to address reimbursement pressures [6][7] - CVS is investing $20 billion over the next decade in digital health initiatives, aiming for $500 million in cost savings in 2025 [7] - The company has a strong cash flow generation and is focused on improving financial performance in its Health Care Delivery segment [4][7] Elevance Health Analysis - Elevance Health, with a market cap of $70.71 billion, is facing challenges due to shifts in Medicaid and ACA membership, leading to increased medical costs and a downward revision of its 2025 EPS outlook to $30 [2][8] - The company closed Q2 2025 with 45.6 million medical members, a decrease of approximately 200,000, and a consolidated benefit expense ratio of 88.9%, up 260 basis points from the previous year [10][13] - Elevance is showing strength in its Medicare Advantage portfolio and is working to stabilize trends in high-cost areas through streamlined processes and AI-enabled tools [11][12] Financial Performance and Projections - CVS Health's EPS for 2025 is projected to grow by 16.6% to $6.32, with estimates trending upward [20][21] - In contrast, Elevance Health's EPS estimate for 2025 is $30.15, reflecting an 8.8% decrease, with estimates having declined by 12.4% in the last 90 days [22] - Year-to-date, CVS shares have increased by 59.4%, while Elevance shares have decreased by 15.9% [16] Conclusion - CVS Health is positioned for long-term growth with its digital investments and restructuring efforts, while Elevance Health faces challenges in the ACA and Medicaid markets, making CVS the stronger investment option [22][23]

Core Insights - Elevance Health, Inc. (ELV) is focusing on expanding its value-based care model, which emphasizes patient outcomes rather than the quantity of care provided [1][2] - The company is particularly enhancing its value-based care offerings in behavioral health and oncology through its Carelon business, which integrates various healthcare services [2][8] Company Performance - Elevance Health's care delivery services target chronic and complex populations, providing tailored care both at home and virtually [3] - The acquisition of CareBridge in 2024 allows the company to offer virtual care to Medicaid and Medicare patients, enhancing its management of home and community-based services [3] - In the last reported quarter, Medicare Advantage memberships increased by 11% year over year, while total revenues rose by 13.4% [4][8] Competitive Landscape - Competitors such as UnitedHealth Group and Humana are also expanding in the value-based care space, with UnitedHealth's Optum division reporting a 5.8% year-over-year revenue growth in the first half of 2025 [5] - Humana's CenterWell business saw an 8.9% year-over-year revenue increase in the same period [6] Valuation and Estimates - Elevance Health's shares have decreased by 14.1% year-to-date, contrasting with a 0.7% decline in the industry [7] - The company trades at a forward price-to-earnings ratio of 9.62, significantly lower than the industry average of 15.16, and currently holds a Value Score of A [10] - The Zacks Consensus Estimate for Elevance Health's 2025 earnings is $30.15 per share, indicating an 8.8% decline from the previous year [11]

Core Insights - The author has extensive experience in executive management, particularly in insurance/reinsurance and the Asia Pacific markets, with a focus on climate change and ESG [1] Group 1 - The author holds an honours degree in economics and politics, emphasizing economic development [1] - The author has 36 years of experience in executive management, providing a deep understanding of relevant markets [1] - The author invests personally, indicating a vested interest in the analysis presented [1]

Core Insights - UnitedHealth Group Incorporated (UNH) and Elevance Health, Inc. (ELV) are facing significant challenges due to rising medical costs, regulatory pressures, and declining investor confidence, leading to substantial stock declines in 2025 [1][22] - UNH's stock has decreased by 40.7% year-to-date, while ELV has seen a 16% decline, against a broader industry slump of 31.6% [2][22] Group 1: Company Comparisons - UnitedHealth has a market capitalization of $275.5 billion, significantly larger than Elevance's $70.3 billion, and a stronger debt-to-EBITDA ratio of 2.03 compared to Elevance's 2.47 [5][22] - UNH's operational model includes vertical integration through UnitedHealthcare and Optum, allowing for better cost control and negotiation power [6][22] - Despite recent pressures, UNH has maintained robust cash flow, enabling continued investment in growth, although it has lowered its outlook after missing estimates [7][22] Group 2: Financial Performance - Elevance achieved a 15.5% growth in premiums in the first half of 2025, surpassing UNH's 12.6% growth [12][22] - Elevance's benefit expense ratio increased to 88.9% in Q2 2025, indicating a significant portion of premium revenue is directed towards claims rather than profitability, with expectations to reach 90% for the full year [13][22] - UNH's medical care ratio rose to 89.4% in Q2 2025, suggesting stronger profitability compared to Elevance [14][22] Group 3: Shareholder Returns and Valuation - Elevance returned over $2 billion to shareholders in the first half of 2025, while UNH returned $9.5 billion, with UNH's dividend yield at 2.95% compared to Elevance's 2.21% [15][22] - Investors are willing to pay a premium for UNH, reflected in its forward P/E ratio of 17.23X versus Elevance's 9.72X [21][22] Group 4: Future Outlook - Both companies are facing unfavorable earnings estimates for 2025 due to rising costs, with UNH's EPS expected to decline by 40.1% year-over-year, while Elevance's is projected to decline by 8.8% [17][20][22] - The acquisition of Amedisys by UNH is expected to enhance its integrated care model and reduce medical costs by minimizing hospitalizations [9][22] - Elevance's Carelon platform is driving growth through digital and AI-enabled solutions, although it still lags behind UNH in profitability and capital efficiency [11][16][22]

Core Insights - Elevance Health, Inc. faced a legal setback as a federal judge dismissed its challenge against the Medicare Advantage star ratings set by the Centers for Medicare & Medicaid Services (CMS) [1][4] - The dismissal means Elevance will forgo an estimated $375 million in bonus payments for 2025 due to a rating that was rounded down from 3.749565 stars to 3.5 stars, just below the four-star threshold [2][8] - The outcome emphasizes the regulatory risks in the Medicare Advantage sector, potentially influencing operational strategies for Elevance and its peers [4] Financial Implications - Elevance's rating downgrade will result in a significant loss of bonus payments, estimated at $375 million for 2025 [2][8] - The company's shares have declined by 16.1% year-to-date, contrasting with the industry's growth of 0.2% [7] Industry Context - CMS issues annual star ratings that are critical for determining federal bonus payments and consumer enrollment in Medicare Advantage plans [3][8] - Other insurers, such as Centene Corporation and Humana Inc., have also faced challenges related to rating methodology changes, with varying outcomes [5][6] Valuation Metrics - Elevance currently trades at a forward price-to-earnings ratio of 9.72, significantly lower than the industry average of 15.25 [10] - The Zacks Consensus Estimate for Elevance's 2025 earnings is $30.15 per share, reflecting an 8.8% decline from the previous year [11]

Market Instability - UnitedHealth 和 Elevance 将退出科罗拉多州的某些个人健康计划，这是 ACA 市场不稳定性的最新迹象 [1]

Core Viewpoint - The iShares U.S. Healthcare Providers ETF (IHF) offers broad exposure to the healthcare providers segment, appealing to both institutional and retail investors due to its low cost and transparency [1][2]. Group 1: ETF Overview - The iShares U.S. Healthcare Providers ETF was launched on May 1, 2006, and is passively managed [1]. - The fund is sponsored by Blackrock and has accumulated over $742.15 million in assets, making it one of the larger ETFs in its segment [3]. - IHF aims to match the performance of the Dow Jones U.S. Select HealthCare Providers Index [3]. Group 2: Index and Holdings - The Dow Jones U.S. Select HealthCare Providers Index is a free-float adjusted market capitalization-weighted index that includes various healthcare providers such as hospitals and nursing homes [4]. - The ETF has a 100% allocation in the healthcare sector, with Unitedhealth Group Inc (UNH) making up approximately 23.08% of total assets [6][7]. - The top 10 holdings constitute about 72.35% of total assets under management [7]. Group 3: Costs and Performance - The annual operating expenses for the ETF are 0.4%, and it has a 12-month trailing dividend yield of 0.96% [5]. - The ETF has experienced a loss of about 3.05% year-to-date and is down approximately 17.49% over the past year [8]. - IHF has a beta of 0.67 and a standard deviation of 18.36% over the trailing three-year period, indicating medium risk [8]. Group 4: Investment Considerations - The ETF carries a Zacks ETF Rank of 3 (Hold), suggesting it is a reasonable option for investors seeking exposure to healthcare ETFs [10].

Core Insights - Elevance Health, Inc. (ELV) is integrating Food as Medicine into its primary care model through a partnership with the National Association of Community Health Centers (NACHC) to enhance treatment plans with nutrition [1][9] - The initiative aims to address food and nutrition insecurities while improving chronic disease management and preventive health outcomes for approximately 34 million Americans served by Community Health Centers (CHCs) [3][9] - Elevance Health's individual medical membership increased by 5.2% year over year in Q2 2025, reaching 1.3 million, with expectations of a 0.7% rise in 2025 [4] Company Strategy - The collaboration will train primary care teams at CHCs to connect Medicaid patients with personalized nutrition support, including medically tailored meals and lifestyle interventions [2][9] - The goal is to establish a scalable Nutrition Center of Excellence that could serve as a national model for food-based clinical care [4][9] Competitor Analysis - Centene Corporation (CNC) reported a 6.2% year-over-year growth in high-acuity Medicaid membership, totaling around 28 million members as of June 30, 2025, with total revenues increasing by 22.4% [5] - Cigna Group (CI) experienced a 3.2% year-over-year growth in international health customers, with total medical customers around 18 million and total revenues rising by 11% [6] Financial Performance - Elevance Health's stock has declined by 16.1% year-to-date, contrasting with a 1% decline in the industry [7] - The company trades at a forward price-to-earnings ratio of 9.62, significantly lower than the industry average of 15.08, and currently holds a Value Score of A [10] - The Zacks Consensus Estimate for Elevance Health's 2025 earnings is $30.59 per share, indicating a 7.4% decline from the previous year [11]

Core Insights - Elevance Health, Inc. is facing challenges from rising medical costs, slower Medicaid recovery, and increased utilization, leading to a reduced outlook for 2025 [1][5] - The company reported a significant increase in benefits expenses and cost of products sold in the first half of the year [1] Financial Performance - Benefits expense surged nearly 18% to over $72 billion, while cost of products sold increased almost 19% to $10.3 billion [1] - The second-quarter benefit expense ratio reached 88.9%, up 260 basis points year over year, with a projected full-year ratio of about 90% compared to 88.5% in 2024 [2][9] Membership and Growth - Commercial individual memberships rose 9.7% in the first half of 2025, following a 25.6% increase in 2024, indicating strong growth in the commercial segment [3][9] - Carelon's revenue is expected to grow nearly 30% in 2025, driven by a 60% surge in Carelon Services [4][9] Competitive Landscape - Other companies in the health benefits space, such as UnitedHealth Group and Centene Corporation, are also experiencing pressure from rising medical costs [6] - UnitedHealth's medical care ratio deteriorated to 89.4%, while Centene's health benefits ratio reached 93%, indicating industry-wide challenges [7] Valuation and Estimates - Elevance's shares have declined 20.7% year-to-date, compared to a 3.9% decline in the industry [8] - The forward price-to-earnings ratio for Elevance is 9.19, significantly lower than the industry average of 14.57, with a Zacks Consensus Estimate for 2025 earnings at $30.59 per share, reflecting a 7.4% decline from the previous year [10][11]

Core Insights - Elevance Health, Inc. (ELV) has experienced a significant decline of 20.3% year to date, underperforming compared to industry peers and the S&P 500 Index [1][7] - The stock closed at $293.99, near the lower end of its 52-week range of $273.71–$567.26, potentially presenting an attractive entry point for value investors [1] - Elevance has a market capitalization of $66.2 billion, with peers like UnitedHealth Group and Centene also facing challenges this year [1] Membership and Revenue Challenges - Medicaid membership has decreased by 15.1% in 2024 and an additional 4.1% in the first half of 2025, impacting revenue [4] - Membership in Medicare Supplement and employer group risk-based segments is also declining, with expectations of continued volatility into 2026 due to recent policy changes [4][6] Rising Costs and Margin Pressure - Medical costs are increasing due to higher utilization, leading to a deterioration in the benefit expense ratio, which worsened by 260 basis points year over year to 88.9% in Q2 [5] - The full-year benefit expense ratio is projected to be around 90%, with expectations of further increases in the second half of the year [5] Analyst Sentiment and Earnings Outlook - Management has revised its full-year 2025 adjusted EPS outlook down to approximately $30, from a previous range of $34.15-$34.85, reflecting a decline from the 2024 figure of $33.04 [6] - Analysts have sharply cut 2025 and 2026 EPS estimates, with the current consensus estimate for 2025 EPS at $30.59, indicating a 7.4% decline from the prior year [9] Valuation Metrics - Elevance Health trades at a forward 12-month P/E of 9.24X, significantly below its five-year median of 13.44X and the industry average of 14.32X, indicating investor caution [10] - Despite a steeper sell-off, peers UnitedHealth and Centene command higher multiples of 14.05X and 9.94X, respectively [10] Long-Term Growth Potential - Elevance has solid long-term growth drivers, including product expansion, revenue diversification, and premium increases, which may help mitigate current pressures [11] - The company is reallocating resources to more profitable areas and has a return on invested capital of 9.36%, outperforming the industry average of 5.80% [12] Shareholder Value Initiatives - Elevance maintains consistent dividend payouts with a yield of 2.33%, higher than the industry average of 1.37% [13] - The company repurchased shares worth $379 million in Q2 2025, with approximately $8 billion remaining under its buyback authorization as of June 30, 2025 [13]