What Elevance Health (ELV) Said on Its Q3 Earnings Call

Key Points

• Elevance raised its 2026 outlook after third-quarter adjusted EPS of $6.99 surpassed expectations, now forecasting at least $29 in adjusted EPS and reaffirming at least 12% adjusted EPS growth in 2027.
• Medicaid, Medicare Advantage and ACA businesses performed better than anticipated. Medicaid margins are expected to improve in 2027, while Medicare Advantage margins are projected at least 2% for 2026 and ACA margins are expected to rise modestly.
• Carelon continued to support growth, with CarelonRx operating gain growth of 10.8% and expanding service wins, while Elevance also raised full-year operating cash-flow guidance to at least $6.5 billion.

Elevance Health NYSE: ELV raised its 2026 earnings outlook after reporting third-quarter adjusted diluted earnings per share of $6.99, exceeding the company’s expectations as Medicaid, Medicare Advantage and Individual ACA businesses all performed better than anticipated.

President and CEO Gail Boudreaux said the company now expects adjusted diluted earnings per share of at least $29 for 2026. Elevance also increased its 2026 earnings baseline by $0.75 to at least $26.75 and reaffirmed its expectation for at least 12% adjusted EPS growth in 2027.

“Execution is strengthening across the enterprise,” Boudreaux said, citing expected improvement in Health Benefits margins, expanded adoption of Carelon services and greater operating efficiency.

Third-Quarter Results and Updated Outlook

Chief Financial Officer Mark Kaye said third-quarter results included about $0.50 per share of operating outperformance, driven by favorable benefit expense performance. The company also recorded a net non-operating benefit of $1.85 per share, primarily from valuation adjustments within investment income, partly offset by certain state tax items.

• Operating revenue rose just under 1% to $50.4 billion.
• Medical membership totaled approximately 44.9 million at quarter-end.
• The consolidated benefit expense ratio improved 70 basis points year over year to 90.6%.
• The adjusted operating expense ratio increased 90 basis points to 11.3%.
• Operating cash flow was $1.3 billion for the quarter.
• Full-year operating cash flow guidance was increased to at least $6.5 billion.

Kaye said higher premium yields, CarelonRx product revenue and service fees helped offset lower health plan membership. Commercial fee-based membership growth offset anticipated Medicaid membership attrition.

The company said it continued to make targeted one-time investments during the quarter in member experience, medical cost management, Carelon value-based solutions, dual-eligible growth initiatives and quality programs including Medicare Stars.

Medicaid Margins Expected to Improve in 2027

Medicaid performance exceeded the company’s outlook, primarily due to recent rate actions. Kaye said July 1 rate updates supported second-half margins as states incorporated more recent cost experience into reimbursement rates. However, he said underlying cost trends remained elevated but broadly stable.

Elevance now expects full-year Medicaid operating margin to be slightly ahead of its prior outlook and continues to view 2026 as the low point for Medicaid profitability. The company expects margins to improve in 2027 as rates become better aligned with costs and its medical cost-management initiatives gain traction.

The company is pursuing behavioral health clinical oversight, care coordination, claims review, coding policies, pharmacy management and network actions. Kaye said the company is also using AI-enabled analytics to identify potentially inappropriate billing and utilization patterns earlier.

Management said states are still determining how they will implement Medicaid work requirements, including verification methods and timing. Felicia Norwood, Elevance’s chief health benefits officer, said state-by-state decisions will influence changes in the Medicaid population and associated acuity.

Over time, Kaye said the company continues to view a 2% to 4% operating margin as the appropriate target range for Medicaid, with the speed of recovery depending largely on rate alignment with the underlying cost of care.

Medicare Advantage and ACA Results Support Guidance

In Medicare Advantage, Elevance said product and geographic actions taken for 2026, along with the quality of its retained membership mix, support a full-year operating margin of at least 2%. Norwood said the company expects further improvement in 2027 as it works toward its long-term target range of 3% to 5%.

The company said approximately half of its Medicare Advantage members will be in plans with ratings of four stars or higher in 2027. Elevance maintained an enterprise-wide average rating of four stars and said it continues to invest in member experience, clinical quality and provider engagement.

Individual ACA performance also tracked ahead of expectations. Kaye said claims developed favorably, while the seasonal increase in plan-paid costs related to the company’s higher bronze-plan mix emerged more slowly than expected. Elevance expects to end 2026 with at least 1.2 million Individual ACA members, after ending the third quarter with about 1.3 million.

The company expects modestly higher full-year ACA operating margin and said it has incorporated its updated risk-adjustment assessment into its outlook. Kaye said the company expects the ACA risk pool to take more than one renewal cycle to normalize following the expiration of enhanced subsidies.

Carelon Growth and Commercial Pricing Discipline

Carelon remained a major focus of the call. Kaye said CarelonRx recorded operating gain growth of 10.8% and a 5.3% operating margin in the quarter, supported by pharmacy benefit manager execution and improved performance in dispensing assets.

The company said integrated medical and pharmacy plans can generate savings of up to $100 per member per month and are associated with 30% or more fewer emergency room visits, according to Kaye. Elevance is also expanding specialty capabilities, including an Oncology Center of Excellence within BioPlus.

Boudreaux said Carelon’s risk-based oncology program had reduced avoidable commercial inpatient admissions by 15%. Separately, the company’s Elevate medical cost-management platform has identified more than $300 million in anticipated savings this year.

Carelon Services has secured new business across behavioral health, clinical care services, specialty and post-acute care for 2027, Kaye said. He added that retention exceeded 90% across most of the company’s product and clinical risk solutions. Boudreaux also said Jeff Park had joined Carelon as president.

In Commercial Group, Kaye said medical cost trend remains elevated but stable and in line with pricing assumptions. The company priced both 2026 and 2027 for a low-double-digit cost-trend environment and expects stable year-over-year margins in its fully insured large-group business.

Management said it has incorporated the effects of the independent dispute resolution process into pricing assumptions. Boudreaux said the company supports No Surprises Act consumer protections but believes administrative controls and claim eligibility processes need improvement to address excessive awards and healthcare affordability pressures.

Looking ahead, Boudreaux said the company’s 2027 earnings outlook is not dependent on a single business line or assumption, but rather on broad-based operating improvement across its health benefits portfolio, Carelon expansion and productivity initiatives.

About Elevance Health (NYSE:ELV)

Elevance Health, Inc NYSE: ELV is a diversified health benefits company that provides health insurance and related services in the United States. Its offerings serve employers, individuals and families, as well as members of government-sponsored programs, including Medicare and Medicaid. The company provides medical, pharmacy, behavioral health and other benefits through a range of health plans and specialty products.

Elevance Health operates its health benefits businesses through a portfolio that includes Blue Cross and Blue Shield-affiliated plans and other insurance offerings.

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