Core Insights - Elevance Health reported $50.09 billion in revenue for Q3 2025, a 12% year-over-year increase, with an EPS of $6.03 compared to $8.37 a year ago, indicating a revenue surprise of +1.15% over estimates and an EPS surprise of +21.08% [1] Financial Performance - Total Medical Membership reached 45.37 million, slightly below the average estimate of 45.62 million [4] - Medicaid membership was 8.65 million, close to the estimate of 8.68 million [4] - Medicare and Medicare Supplement membership was 877 thousand, slightly above the estimate of 867.33 thousand [4] - Commercial Risk-Based membership was 3.62 million, matching the average estimate [4] Revenue Breakdown - Service fees generated $2.14 billion, exceeding the estimate of $2.07 billion, with a year-over-year increase of +5.6% [4] - Premiums totaled $41.79 billion, surpassing the estimate of $41.04 billion, reflecting a +13.5% year-over-year change [4] - Net investment income was $625 million, significantly above the estimate of $449.12 million, marking a +13.4% increase year-over-year [4] - Product revenue was $6.16 billion, slightly below the estimate of $6.34 billion, with a +4.6% year-over-year change [4] Operating Revenue - Carelon Services reported total operating revenue of $7.32 billion, below the estimate of $7.46 billion, but showing a +57.9% year-over-year increase [4] - CarelonRx generated $11 billion in operating revenue, exceeding the estimate of $10.52 billion, with a +20.3% year-over-year change [4] - Health Benefits operating revenue was $42.25 billion, surpassing the estimate of $41.54 billion, reflecting a +10.4% year-over-year increase [4] - Eliminations reported a total of $-10.63 billion, slightly below the estimate of $-10.14 billion, with a +43.4% year-over-year change [4] Stock Performance - Elevance Health shares returned +11.4% over the past month, outperforming the Zacks S&P 500 composite's +1.2% change [3] - The stock currently holds a Zacks Rank 5 (Strong Sell), indicating potential underperformance in the near term [3]

Financial Data and Key Metrics Changes - Elevance Health reported third quarter GAAP diluted earnings per share of $5.32 and adjusted diluted earnings per share of $6.03, reflecting enhanced medical cost management and expense discipline [14][15] - Total operating revenue for the quarter was $50.1 billion, up 12% year over year, driven by higher premium yields and growth in Medicare Advantage membership [15] - The consolidated benefit-expense ratio was 91.3%, aligned with expectations, while Medicaid performance faced pressure from elevated acuity and utilization [15][16] Business Line Data and Key Metrics Changes - In Medicare Advantage, approximately 55% of members will be in four-star or higher contracts for the 2027 payment year, up from about 40% for 2026, indicating improvement in STAR ratings [8] - CarelonRx revenue grew 20% year over year, driven by strong momentum with large clients, while Carelon Services grew by more than 50% [17] - The ACA market is experiencing higher acuity, and the anticipated expiration of enhanced subsidies could significantly impact membership in 2026 [9][10] Market Data and Key Metrics Changes - Medicaid operating margin is expected to be modestly negative for 2025, with a decline of at least 125 basis points anticipated for 2026 due to elevated acuity and utilization trends [16][20] - The company expects a high single-digit decline in full-year operating margin for the ACA market, while commercial group business margins remain consistent with prior expectations [16][50] Company Strategy and Development Direction - The company is focused on lowering the total cost of care and improving member experience through an integrated clinical and benefits approach, leveraging value-based care [6][10] - Elevance Health is committed to disciplined capital allocation, balancing investment and growth with consistent shareholder returns, including share repurchases [12][13] - The company is investing in technology, particularly AI, to enhance member and provider experiences, aiming for long-term growth [34][38] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenges posed by rising medical and pharmacy costs and regulatory changes impacting coverage for millions of Americans [6] - The company is approaching 2026 with a prudent and practical posture, setting expectations that reflect current realities and uncertainties [7][22] - Management is confident in the strategy and execution, aiming for sustainable value for stakeholders despite a dynamic external environment [13][22] Other Important Information - The company is expanding external relationships and scaling pharmacy, behavioral health, and specialty care management, embedding value-based care principles throughout [9][10] - By year-end, over 10 million members will have access to the AI-enabled virtual assistant, enhancing access and engagement [11] Q&A Session Summary Question: Medicaid margin outlook and state discussions - Management discussed the expectation of a 125 basis point decline in Medicaid margins for 2026, driven by elevated acuity and utilization trends, and noted constructive conversations with states regarding rate adequacy [24][28][27] Question: Investment spending impact on 2026 - Management clarified that several hundred million dollars of investment is planned for technology adoption, Carelon expansion, and operational initiatives, which are expected to enhance long-term growth [32][34] Question: ACA membership impact from subsidy expiration - Management indicated that if enhanced subsidies expire, a material contraction in the ACA marketplace is expected, leading to lower enrollment and higher premium increases [41][45] Question: Medicaid membership outlook - Management anticipates a modest decline in Medicaid membership for 2026 due to ongoing re-verification processes and state program changes [75][76] Question: Medicaid coding trends and provider engagement - Management is actively working with providers to ensure accurate clinical documentation and is taking steps to improve oversight and compliance [81][84]

Financial Data and Key Metrics Changes - Elevance Health reported third quarter GAAP diluted earnings per share of $5.32 and adjusted diluted earnings per share of $6.03, reflecting enhanced medical cost management and expense discipline [14] - Total operating revenue for the quarter was $50.1 billion, up 12% year-over-year, driven by higher premium yields and growth in Medicare Advantage membership [15] - The consolidated benefit-expense ratio was 91.3%, aligned with expectations, while the Medicaid operating margin is expected to be modestly negative for the full year 2025 [15][16] Business Line Data and Key Metrics Changes - In Medicare Advantage, approximately 55% of members will be in four-star or higher contracts for the 2027 payment year, up from about 40% for 2026, indicating improved STAR performance [8] - CarelonRx revenue grew 20% year-over-year, driven by strong momentum with large clients, while Carelon Services grew by more than 50% [17] - The integrated medical pharmacy model and advocacy solutions are driving higher retention and expanded fee-based relationships in the commercial segment [17] Market Data and Key Metrics Changes - The ACA market is experiencing higher acuity, and the anticipated expiration of enhanced subsidies could significantly impact membership in 2026 [9] - Medicaid performance is under pressure from elevated acuity and utilization, with disenrollment concentrated among lower acuity members due to stricter eligibility reviews [15][16] - The company expects a high single-digit decline in full-year operating margin for the ACA business, while commercial group margins are expected to remain consistent with prior expectations [16] Company Strategy and Development Direction - The company is focused on lowering the total cost of care and improving member experience through an integrated clinical and benefits approach [6] - Elevance Health is committed to disciplined capital allocation, balancing investment and growth with consistent shareholder returns, prioritizing share repurchases [13] - The company is investing in technology, particularly AI, to enhance member and provider experiences, aiming for long-term growth [34][36] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenges posed by rising medical and pharmacy costs and regulatory changes impacting coverage [6] - The company is approaching 2026 with a prudent and practical posture, planning for at least a 125 basis point decline in Medicaid margins due to elevated acuity and utilization trends [7][20] - Management remains confident in the long-term growth algorithm, expecting 2027 to mark a return to a more balanced earnings growth profile [22][72] Other Important Information - The company is integrating recent acquisitions to expand Carelon's capabilities while maintaining a strong balance sheet to support growth objectives [20][13] - The company is proactively working with state partners on rate alignment and operational enhancements to ensure the sustainability of Medicaid programs [10][20] Q&A Session Summary Question: Medicaid margin outlook and state discussions - Management discussed the expectation of a 125 basis point margin decline next year, with ongoing discussions with states about affordability and program changes [24][28] Question: Investment spending impact on 2026 - Management clarified that several hundred million dollars of investment is aimed at technology adoption, Carelon scaling, and operational improvements, which are expected to enhance long-term growth [32][34] Question: ACA membership impact from subsidy expiration - Management indicated that if enhanced subsidies expire, a material contraction in the ACA marketplace is expected, leading to lower enrollment and higher premium increases [41][45] Question: Medicaid membership and revenue outlook - Management anticipates a modest decline in Medicaid membership in 2026 due to ongoing normalization following the redetermination process [75] Question: Medicaid risk pool shifts and coding trends - Management noted that elevated acuity and utilization pressures are impacting Medicaid margins, with ongoing efforts to improve coding accuracy and compliance [82][84]

Financial Data and Key Metrics Changes - Elevance Health reported third quarter GAAP diluted earnings per share of $5.32 and adjusted diluted earnings per share of $6.30, reflecting enhanced medical cost management and expense discipline [16][17] - Total operating revenue for the quarter was $50.1 billion, up 12% year over year, driven by higher premium yields and growth in Medicare Advantage membership [17][18] - The consolidated benefit expense ratio was 91.3%, aligned with expectations, while the Medicaid operating margin is expected to be modestly negative for the full year 2025 [17][18] Business Line Data and Key Metrics Changes - In Medicaid, performance was pressured by elevated acuity and utilization, leading to a projected decline of at least 125 basis points in margins for 2026 [18][22] - Medicare Advantage costs were marginally better than expected due to disciplined plan design, with approximately 55% of MA members in four-star or higher contracts for the 2027 payment year, up from about 40% for 2026 [8][18] - CarillonRx revenue grew 20% year over year, driven by strong momentum with large clients, while Carillon Services grew by more than 50% [20][21] Market Data and Key Metrics Changes - The ACA market is expected to face significant membership impacts if enhanced subsidies expire, with independent estimates indicating lower enrollment and a higher morbidity risk pool for 2026 [10][54] - The anticipated expiration of enhanced subsidies would significantly impact membership in 2026, with the company prepared to work with states to ensure continued access for consumers [10][54] Company Strategy and Development Direction - The company is focused on lowering the total cost of care and improving member experience through an integrated clinical and benefits approach, leveraging value-based care [5][6] - Capital deployment remains a key lever for long-term earnings growth, with a commitment to disciplined capital allocation and returning capital to shareholders through share repurchases [14][21] - The company is prioritizing durable, long-term performance over near-term expense leverage, with targeted investments in AI and digital tools to enhance member and provider experience [25][41] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the dynamic external environment and emphasized a prudent approach to planning for 2026, with expectations for continued challenges in Medicaid [15][22] - The company expects 2026 to be a low point for Medicaid margins, with a return to a more balanced earnings growth profile anticipated in 2027 [25][84] - Management expressed confidence in the strategy and execution, aiming to drive sustainable value for stakeholders despite external uncertainties [15][25] Other Important Information - The company is integrating recent acquisitions and focusing on operational efficiency to sustain growth and enhance performance across the enterprise [20][21] - The company has made significant investments in technology and operational initiatives to improve star ratings and member engagement [41][42] Q&A Session Summary Question: Medicaid margin expectations and state discussions - Management discussed the challenges in Medicaid margins, indicating a slight negative margin for 2025 and a projected decline of at least 125 basis points for 2026, with constructive conversations with states about improving affordability [27][30][34] Question: Investment spending and its impact - Management clarified that several hundred million dollars in investments are planned for 2026, focusing on technology adoption, Careline investments, and operational initiatives to enhance long-term growth [39][40][41] Question: Impact of enhanced subsidies on ACA membership - Management indicated that if enhanced subsidies expire, a material contraction in the ACA marketplace is expected, leading to lower enrollment and a higher morbidity risk pool for 2026 [50][54] Question: Medicaid membership outlook - Management expects Medicaid membership to decline modestly in 2026 due to ongoing normalization following the redetermination process and state program changes [87][88] Question: Variability in Medicaid performance by state - Management acknowledged variability in Medicaid performance across states and indicated a willingness to exit contracts if financial expectations are not met [70][72]

Financial Data and Key Metrics Changes - Elevance Health reported third quarter GAAP diluted earnings per share of $5.32 and adjusted diluted earnings per share of $6.03, reflecting enhanced medical cost management and expense discipline [12][14] - Total operating revenue for the quarter was $50.1 billion, up 12% year over year, driven by higher premium yields and growth in Medicare Advantage membership [14][15] - The consolidated benefit-expense ratio was 91.3%, aligned with expectations, while Medicaid performance faced pressure from elevated acuity and utilization [14][15] Business Line Data and Key Metrics Changes - In Medicare Advantage, approximately 55% of members will be in four-star or higher contracts for the 2027 payment year, up from about 40% for 2026, indicating improvement in STAR ratings performance [6][15] - CarelonRx revenue grew 20% year over year, driven by strong momentum with large clients, while Carelon Services grew by more than 50% due to robust organic growth [16][17] - The ACA market is expected to face challenges due to the anticipated expiration of enhanced subsidies, which could significantly impact membership in 2026 [8][14] Market Data and Key Metrics Changes - Medicaid operating margin is expected to be modestly negative for 2025, with a projected decline of at least 125 basis points in 2026 due to ongoing acuity and utilization trends [15][18] - The company anticipates a high single-digit decline in full-year operating margin for the ACA business, while commercial group margins are expected to remain consistent with prior expectations [15][16] - The anticipated expiration of enhanced subsidies could lead to a material contraction in the ACA marketplace, affecting overall membership [40][41] Company Strategy and Development Direction - The company is focused on lowering the total cost of care and improving member experience through an integrated clinical and benefits approach, leveraging value-based care [4][10] - Elevance Health is committed to disciplined capital allocation, balancing investment and growth with consistent shareholder returns, including share repurchases [11][18] - The company is investing in technology adoption, Carelon capabilities, and operational initiatives to enhance performance and support long-term growth [30][31] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the dynamic external environment but expressed confidence in the company's strategy and execution to drive sustainable value [11][20] - The company is proactively working with state partners on rate alignment and program improvements to ensure the sustainability of Medicaid programs [9][26] - Management expects 2026 to be a trough year for Medicaid margins, with a return to a more balanced earnings growth profile anticipated in 2027 [24][66] Other Important Information - The company is integrating recent acquisitions to expand Carelon's capabilities while maintaining a strong balance sheet to support growth objectives [11][18] - The company is embedding AI and digital tools across operations to enhance member and provider experiences, aiming for improved affordability and operational performance [30][35] Q&A Session Summary Question: Medicaid margin outlook and state discussions - Management indicated that Medicaid margins are expected to be slightly negative for 2025, with a projected decline of at least 125 basis points in 2026 due to elevated acuity and utilization trends [22][24] - Discussions with states are constructive, with states exploring ways to reduce overall Medicaid program costs and improve affordability [25][26] Question: Investment spending impact on 2026 - The company plans to make several hundred million dollars in discrete investments to advance strategic goals, which are expected to impact EPS positively in the long term [29][30] Question: ACA membership impact from subsidy expiration - If enhanced subsidies expire, a material contraction in the ACA marketplace is expected, leading to lower enrollment and higher premium increases [40][41] Question: Medicaid risk pool shifts and coding trends - Management noted that elevated acuity and utilization pressures have led to a below-breakeven Medicaid operating margin, with ongoing efforts to improve coding accuracy and compliance [76][78] Question: State partners considering benefit adjustments - States are looking at various levers, including potential program changes, to improve affordability in Medicaid, with adjustments typically aligning with new contract years [81][83]

Financial Data and Key Metrics Changes - Elevance Health reported third quarter GAAP diluted earnings per share of $5.32 and adjusted diluted earnings per share of $6.30, reflecting enhanced medical cost management and expense discipline [17][19] - Total operating revenue for the quarter was $50.1 billion, up 12% year over year, driven by higher premium yields and growth in Medicare Advantage membership [19][20] - The consolidated benefit expense ratio was 91.3%, aligned with expectations [19][20] Business Line Data and Key Metrics Changes - Medicaid performance faced pressure from elevated acuity and utilization, with expectations of a modestly negative operating margin for the full year 2025 and a decline of at least 125 basis points in 2026 [20][24] - Medicare Advantage costs were marginally better than expected, with an anticipated slight increase in operating margin for 2025 [20][21] - The ACA market showed favorable development compared to expectations, but cost trends remain significantly above historical levels [21] Market Data and Key Metrics Changes - The company ended the quarter with 45.4 million medical members, with Medicaid membership concentrated among lower acuity members due to stringent eligibility reviews [19][20] - In the ACA market, the anticipated expiration of enhanced subsidies could significantly impact membership in 2026 [10][21] Company Strategy and Development Direction - The company is focused on lowering the total cost of care and improving member experience through an integrated clinical and benefits approach [5][6] - Elevance Health is committed to disciplined capital allocation, balancing investment in growth with consistent shareholder returns, and prioritizing returning capital to shareholders through share repurchases [15][23] - The company is investing in technology adoption, Careline capabilities, and operational initiatives to enhance performance and member satisfaction [42][44] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by rising medical and pharmacy costs and regulatory changes impacting coverage for millions of Americans [5][6] - The company is approaching 2026 with a prudent and practical posture, setting expectations that reflect current realities and uncertainties [6][14] - Management expressed confidence in the strategy and execution, anticipating a return to a more balanced earnings growth profile in 2027 [27][86] Other Important Information - The company is expanding external relationships and scaling pharmacy, behavioral health, and specialty care management, with external revenue growing double digits year over year [11][12] - The company is embedding AI-enabled tools to enhance access, efficiency, and engagement across its platform [13][44] Q&A Session Summary Question: Medicaid margin expectations and state discussions - Analyst inquired about the Medicaid margin outlook and the company's discussions with states regarding rate updates and cost trends [29] - Management clarified that the Medicaid trend assumption is anchored to expected fourth quarter exit rates, with elevated acuity and utilization driving pressures [32][33] Question: Investment spending and its impact on earnings - Analyst asked about the nature of investment spending and its potential transitory impact on earnings growth [40] - Management indicated that investments are focused on technology adoption, Careline scaling, and operational improvements, aimed at long-term growth [42][44] Question: Impact of enhanced subsidies on ACA membership - Analyst sought clarity on the potential impact of enhanced subsidies expiration on ACA membership [50] - Management acknowledged that expiration could lead to a material contraction in the ACA marketplace, with expectations of lower enrollments and higher morbidity risk [55] Question: Medicaid risk pool shifts and coding trends - Analyst inquired about the expected risk pool shifts and updates on coding trends from providers [101] - Management noted that elevated acuity and utilization pressures have not been fully offset by rate updates, and they are working on improving coding accuracy and compliance [104][106] Question: State partners' potential benefit adjustments - Analyst asked if state partners are considering pulling back on benefits to improve affordability [110] - Management confirmed that states are exploring various levers, including program changes, to enhance affordability in Medicaid programs [112]

Core Insights - Elevance Health reported a third quarter net income of nearly $1.2 billion, reflecting a 17.8% increase from $1 billion in the same period last year [4][3] - Total revenues for the third quarter rose by 12.4% to $50.7 billion, driven by higher premium yields and growth in Medicare Advantage membership [4][7] Financial Performance - The benefit expense ratio increased to 91.3%, up 180 basis points year over year, primarily due to elevated costs in the Medicare business [5] - Operating revenue for the third quarter was up 12% to $50.1 billion, influenced by recent acquisitions and growth in health benefits segments [7] Membership and Services - Elevance ended the third quarter with 45.4 million health plan members, a slight decrease of less than 1% compared to the previous year, attributed to lower BlueCard and Medicaid membership [7] - The Carelon health services business experienced significant growth, with operating revenue increasing by 33% to $18.3 billion, supported by acquisitions and scaling of risk-based solutions [7] Strategic Focus - The company emphasized disciplined execution and a focus on affordability and member experience through value-based care partnerships and AI-enabled digital solutions [6]

Q3 2025 Financial Performance - Elevance Health's Q3 2025 operating revenue reached $50.1 billion, a 12.0% increase year-over-year, driven by higher premium yields, acquisitions, and Medicare Advantage growth, offset by Medicaid reverifications[4, 7] - The benefit expense ratio was 91.3%, aligning with expectations but reflecting elevated costs across business lines[3, 7] - Adjusted diluted EPS was $6.03, including approximately $1 of higher net investment income and tax benefit timing[3] - Operating cash flow was $1.1 billion, impacted by the BCBSA Provider Settlement Agreement payment[7] Health Benefits Segment - Health Benefits operating revenue increased by 10.4% to $42.2 billion, driven by higher premium yields, acquisitions, and Medicare Advantage growth, partially offset by Medicaid reverifications[4, 9, 10] - Adjusted operating margin for Health Benefits declined by 280 bps to 1.4%, due to higher medical costs and strategic investments[9, 10] - Health Benefits membership stood at 45.4 million, reflecting lower BlueCard membership and Medicaid reverifications, offset by Medicare Advantage growth[9, 10] Carelon Segment - Carelon's operating revenue grew by 32.9% to $18.3 billion, driven by its integrated platform and performance in Pharmacy and Services[4, 12] - Adjusted operating gain for Carelon was $0.8 billion, a decrease of 9.5%[12] - Carelon Services revenue increased by approximately 60%, supported by the CareBridge integration and expansion of risk-based and home-health capabilities[13] Strategic Outlook - Elevance Health reaffirmed its full-year adjusted diluted EPS guidance of approximately $30, including a benefit expense ratio of approximately 90.0% and approximately $3 of discrete, non-core items[3] - The company anticipates Medicaid operating margin to decline by at least 125 basis points year-over-year due to rate increases lagging acuity and utilization trends[3] - Approximately 55% of Medicare Advantage members are in 4-Star or higher contracts for payment year 2027, up from approximately 40%[3]

Core Insights - Elevance Health exceeded Wall Street profit estimates for the third quarter, leading to a 3% increase in shares during premarket trading [1] - The company managed to control medical costs despite warnings from several insurers about elevated costs in government-backed plans due to increased healthcare demand [1][2] Financial Performance - Elevance reported a quarterly medical loss ratio of 91.3%, an increase from 89.5% in the same period last year, but better than analysts' expectations of 91.73% [4] - The company's quarterly adjusted profit per share was $6.03, surpassing estimates of $4.93 [5] - Carelon's operating revenue rose approximately 33% to $18.3 billion, driven by recent acquisitions in home health and pharmacy services [5] Strategic Outlook - CEO Gail Boudreaux emphasized the company's disciplined execution and management as they plan for 2026 [2] - Elevance reaffirmed its adjusted profit forecast for 2025 at about $30 per share and projected a medical loss ratio of 90% [5] - The company had previously indicated elevated medical costs in its individual plans and Medicaid plans, primarily due to its Medicare business [3]

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