Elevance flags higher costs in Medicaid business in 2026, shares retreat

Core Insights - Elevance Health anticipates elevated medical costs in its Medicaid business to continue into next year, with potential subsidence only by 2027 [1][2] - The company's third-quarter profit exceeded expectations, but concerns over Medicaid costs led to a 4% drop in shares [1] Medicaid Business - The Medicaid segment is under pressure due to a churn in enrollment, with healthier members dropping off and those requiring more medical services taking their place [2][3] - Chief Financial Officer Mark Kaye indicated that 2026 will be the low point for Medicaid profitability, with improvements expected through 2027 [2] - Elevated demand for behavioral health services and weight-loss drugs is contributing to increased costs in government-backed plans [3] Financial Performance - Elevance's third-quarter medical loss ratio was reported at 91.3%, slightly better than analysts' expectations of 91.73% [6] - The adjusted profit per share for the third quarter was $6.03, surpassing estimates of $4.93 [6] Future Outlook - The company expects higher costs in the fourth quarter as members utilize benefits ahead of changes in individual plans under the Affordable Care Act [4] - The expiration of additional premium tax credits in 2026 adds uncertainty to patient enrollments [4] - Elevance plans to provide a formal forecast for 2026 in January, while reaffirming its 2025 adjusted profit forecast of approximately $30 per share and a medical loss ratio of 90% [5]