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    ELV
    Earnings call· Dec 2025(Q4 FY25)

    Elevance Health, Inc. ELV

    Jan 28, 2026 Source

    Executive summary

    Elevance Health Q4 FY25 — Strategic Repositioning for Durable Growth

    Elevance Health is strategically repositioning its portfolio in 2026, focusing on pricing discipline and operational rigor to strengthen margins and reduce volatility, particularly in Medicaid and Medicare Advantage. The company anticipates a return to at least 12% adjusted EPS growth in 2027, leveraging its diversified platform and targeted investments in Carelon and digital capabilities. This approach aims to deliver sustainable earnings growth despite a dynamic operating environment.

    Highlights

    5

    • Full-year adjusted diluted EPS reached $30.29.

    • Operating revenue for Q4 FY25 increased 10% from the prior year to $49.3 billion.

    • Operating cash flow for FY25 was $4.3 billion.

    • The company returned $4.1 billion of capital to shareholders in FY25, including $2.6 billion in share repurchases.

    • Commercial business demonstrated healthy momentum, with 40 employers selecting Anthem-affiliated plans as their sole carrier over the past 5 years.

    Concerns

    5

    • Medicaid operating margin is expected to be approximately negative 1.75% in 2026 due to rates lagging elevated acuity and utilization.

    • Medicare Advantage membership is projected to decline in the high teens percentage range in 2026, reflecting deliberate portfolio actions.

    • The 2025 results included approximately $3.75 per share of favorable nonrecurring items, impacting the year-over-year comparison for 2026 guidance.

    • Consolidated benefit expense ratio for Q4 FY25 was 93.5%.

    • Operating cash flow in December was negatively impacted by the timing of certain Medicaid-related payments.

    Guidance & targets

    20
    CategoryTargetConfidence
    Adjusted diluted earnings per share
    at least $25.50
    high materiality
    High
    Adjusted EPS growth
    at least 12%
    high materiality
    High
    Medicaid operating margin
    approximately negative 1.75%
    high materiality
    High
    Medicare Advantage membership decline
    high teens percentage range
    high materiality
    High
    Medicare margin improvement
    meaningful margin improvement
    high materiality
    High
    Long-term enterprise margin target
    5% to 6%
    high materiality
    High
    Health Benefits margin target
    mid-single-digit
    medium materiality
    High
    Carelon margin target
    mid-single-digit
    medium materiality
    High
    CarelonRx margin target
    mid-single-digit
    medium materiality
    High
    Carelon Services margin target
    unchanged
    medium materiality
    High
    Operating revenue decline
    low single-digit percent range
    high materiality
    High
    Consolidated medical loss ratio
    90.2%, plus or minus 50 basis points
    high materiality
    High
    Adjusted operating expense ratio
    10.6%, plus or minus 50 basis points
    medium materiality
    High
    Share repurchases
    approximately $2.3 billion
    medium materiality
    High
    Operating cash flow
    at least $5.5 billion
    high materiality
    High
    EPS seasonality
    earn approximately 2/3 of adjusted EPS in the first half of 2026
    low materiality
    High
    Individual ACA members
    at least 900,000 members
    medium materiality
    High
    Employer Group risk-based membership decline
    high single-digit percent range
    medium materiality
    High
    Medicaid composite rate increase
    mid-single-digit percent range
    medium materiality
    High
    Prior authorization decisions in real time
    80%
    low materiality
    High

    Segment performance

    6
    SegmentRevenueYoYQoQMargin
    Medicaid
    Q4 margins were slightly better than outlook due to favorable prior period development and modest retroactive rates, but still reflected elevated utilization and ongoing reverification-driven risk deterioration. 2026 is expected to be a trough year, with rates lagging elevated cost trends.
    Operating margin (FY26): approximately -1.75%Cost trend (FY26): mid-single-digit percent rangeRates (FY26): lag trendComposite rate increase (FY26): mid-single-digit percent range
    		———pressured in Q4 FY25
    Medicare
    Deliberate changes to plan offerings and exiting select geographies were made to prioritize plans delivering value and sustainable financial performance. Focus on D-SNP and HMO products. Q4 margins, including IRA-driven Part D seasonality, were in line with expectations.
    Cost trend (Q4 FY25): consistent with expectationsMembership decline (FY26): high teens percentage range
    		———meaningful improvement to at least 2% (FY26)
    Individual ACA
    Repositioned for higher expected morbidity following the expiration of enhanced subsidies. Q4 performance was slightly better than the prudent outlook. Membership is up approximately 10% post open enrollment, helped by growth in new markets, offsetting intentional attrition in core blue states.
    Members (FY26 year-end): at least 900,000Cost trends (FY26): accelerating
    		—up approximately 10% (post open enrollment)—better performance (FY26)
    Commercial Group Risk
    Cost patterns and margins were largely consistent with expectations in Q4. The expected decline in membership for 2026 is driven by a strong focus on margin discipline and deliberate pricing decisions, particularly in public sector accounts with lower or negative margins.
    		—decline in high single-digit percent range (FY26)—stable (Q4 FY25)
    Commercial ASO
    Experienced a very strong national account selling season with favorable client retention. Success in the second Blue bid process contributed to strong performance, with a robust pipeline for future years. Pull-through with CarelonRx has been strong, especially in the upmarket.
    Second Blue bid wins (FY26): 9 out of 11 bids
    		————
    Carelon
    Strong customer demand for solutions. Near-term growth moderated by lower health plan membership, particularly in CarelonRx. Carelon Services is less impacted due to its broad mix of external relationships and value-based arrangements. Long-term margin targets for CarelonRx adjusted due to composition of business growth (large upmarket jumbo accounts, specialty business) and policy perspective.
    External sales (FY25): best year ever in services and RxOperating gain growth (FY26): low single-digitServices growth (ex-internal membership headwind): high teens, low 20sRx growth (ex-internal membership headwind): low double-digit range
    		———mid-single-digit (long-term target for Carelon and CarelonRx)

    Operational metrics

    17
    Adjusted diluted EPS
    $3.33
    Q4 FY25

    Reported for the fourth quarter.

    Adjusted diluted EPS
    $30.29
    FY25

    Reported for the full year.

    Favorable nonrecurring items
    $3.75 per share
    FY25

    Included in 2025 results, impacting year-over-year comparison for 2026.

    Incremental investments pulled forward
    $0.25 per share
    Q4 FY25

    Represents 1/4 of the approximately $1 of incremental investments planned for 2026, pulled forward to Q4 2025.

    Workforce investments
    $0.25 per share
    Q4 FY25

    Additional deployment towards retention and targeted workforce investments.

    Days in claims payable
    41.3 daysdecrease of 0.1 days sequentially
    Q4 FY25

    Expected to remain in the low 40s range for 2026, consistent with long-term target.

    Share repurchases
    $470 million
    Q4 FY25

    Part of total capital returned to shareholders.

    Share repurchases
    $2.6 billion
    FY25

    Total repurchases for the full year.

    Capital returned to shareholders
    $4.1 billion
    FY25

    Combined with dividends paid during the year.

    Flu headwind
    20 basis points
    Q1 FY26

    Expected headwind for Q1 2026, embedded in outlook, due to meaningful uptick in influenza-like activity in December.

    Medicaid premiums reset
    1/3
    January

    Refers to the portion of Medicaid premiums that reset in January.

    Operating revenue
    $49.3 billionup 10% from prior year
    Q4 FY25

    Driven by premium rate adjustments in recognition of higher cost trends and acquisitions.

    Carelon Services growth
    almost 60%
    FY25

    Strong growth in Carelon Services.

    CarelonRx growth
    over 20%
    FY25

    Strong growth in CarelonRx.

    Total members
    45.2 milliondecrease of approximately 500,000 year-over-year
    FY25 end

    Principally reflecting a decline in Medicaid membership due to continued eligibility reverifications.

    Patient advocacy programs members
    7 millionup nearly 20% from last year
    current

    Through proactive tailored support, helping members navigate the system and close gaps in care.

    Seniors selecting MA
    more than 55%
    current

    Refers to the popularity of the Medicare Advantage program.

    Industry KPIs

    9
    MetricValueDetails
    Utilization trendsmid-single-digit percent range%
    Stars rate environmenteffectively flat
    Medical loss care ratio93.5%%
    Client retention new wins9wins
    Pharmacy scripts specialtyover 20%%
    Membership covered lives by line45.2 millionmembers
    Segment revenue operating income$49.3 billionUSD
    Adjusted EPS EBITDA leverage guidance$30.29USD
    Medical cost trend vs pricing assumptionmid-single-digit percent range%

    Risks & headwinds

    6
    Medicaid rates lagging elevated acuity and utilizationFY26

    Medicaid operating margin expected to be approximately negative 1.75% in 2026

    Mitigation: Working urgently with state partners on rate actions and program design changes; strengthening analytics to identify outlier utilization and billing patterns; targeted actions including provider education, claims review enhancements, and payment accuracy initiatives.

    Medicare Advantage membership declineFY26

    high teens percentage range in 2026

    Mitigation: Deliberate portfolio actions and stability in dual eligible membership; prioritizing plans that deliver value and sustainable financial performance; focusing on D-SNP and HMO products.

    Expiration of enhanced ACA subsidiesFY26

    Expected to pressure retention and increase lapse activity; accelerating cost trends in ACA

    Mitigation: Repositioned plans with discipline to reflect higher costs and expiration of subsidies; maintaining value and access for consumers.

    MA rate notice not keeping pace with medical cost and utilization trendsFY26

    Effectively flat rate notice

    Mitigation: Advocating with CMS for appropriate funding that reflects actual utilization and cost trends; working to ensure changes to risk adjustment framework are accurate and predictable; protecting seniors' access and affordability.

    Elevated cost trends across major lines of businessFY26

    Medicaid cost trend in mid-single-digit percent range (FY26), roughly twice historical average; accelerating cost trends in ACA (FY26); higher reported cost trend in Medicare (FY26)

    Mitigation: Aligning pricing to elevated cost trends; refining product portfolio; investing in capabilities to differentiate model; tightening cost management; expanding behavioral health interventions; program integrity activities.

    Flu headwindQ1 FY26

    20 basis points

    Mitigation: Experience carried into 2026 planning and embedded in outlook.

    What to watch in Q1 FY26

    5

    Medicaid operating margin improvement

    over time, next quarter for initial signs
    Currentapproximately negative 1.75% for 2026
    Targetimprovement over time

    Why it matters

    This is a key profitability driver for the Medicaid segment and indicates the effectiveness of state negotiations and cost management actions.

    We expect our Medicaid operating margin to be approximately negative 1.75% with improvement over time⏳ as rates incorporate more current experience and our actions take hold.

    Q&A highlights

    8

    Are 2026 cost trend assumptions similar to 2025, or are there expectations for improvement or worsening in specific segments?

    Q4 medical cost performance was generally in line or slightly better than expected. For 2026, Commercial large group expects elevated but stable trends, ACA expects accelerating trends due to subsidy expiration and acuity shift, Medicaid expects continued pressure but moderation versus 2025 into mid-single-digit range, and Medicare anticipates higher reported trends driven by D-SNP mix.

    “In Medicaid, we expect cost pressure to remain pressured again in 2026 at roughly twice the historical average. And that's going to reflect elevated utilization. It's going to reflect continued misalignment between rates and member acuity. That said, I would say, after 2 years of fairly unprecedented trend, we do expect some moderation versus 2025.”

    asked by Albert Rice · answered by Mark Kaye

    3 min read7 chapters

    Detailed Narrative

    01

    Strategic Repositioning for 2026

    Elevance Health is approaching 2026 as a pivotal year for execution and repositioning, with an outlook grounded in prudent, achievable assumptions. The company is emphasizing pricing discipline, operational rigor, and targeted investments to strengthen margins and reduce volatility across its diverse portfolio. This strategic shift is designed to improve the consistency of performance and align the cost structure with evolving market dynamics, setting the stage for future growth.

    02

    Medicaid Program Sustainability and Challenges

    The Medicaid segment faces significant challenges, with rates lagging elevated acuity and utilization, leading to an expected operating margin of approximately -1.75% in 2026, which is viewed as a trough year. The company is actively collaborating with state partners on rate actions and program design changes to ensure long-term sustainability. Additionally, new federal legislation, the One Big Beautiful Bill Act, is anticipated to cause shifts in Medicaid membership and acuity, which management believes is manageable within its diversified enterprise.

    03

    Medicare Advantage Portfolio Optimization

    Elevance Health has undertaken deliberate portfolio actions in Medicare Advantage, resulting in an expected membership decline in the high teens percentage range for 2026. This strategy prioritizes plans that deliver value and sustainable financial performance, with a focus on D-SNP and HMO products. Despite the membership reduction, these actions are projected to drive meaningful margin improvement to at least 2% in 2026, reflecting a disciplined approach to profitability.

    04

    Commercial Business Momentum and ACA Adjustments

    The Commercial business, particularly national accounts, is experiencing healthy momentum, supported by a productive selling season and strong client retention. The company successfully won 9 out of 11 bids in the second Blue category for 2026, indicating continued market strength. In the individual ACA market, plans have been repositioned to account for higher expected morbidity following the expiration of enhanced subsidies, with a focus on maintaining value and access while ensuring margin stability.

    05

    Carelon's Growth and Evolving Mix

    Carelon continues to see strong demand for its solutions, although near-term growth is moderated by lower health plan membership, primarily impacting CarelonRx. Carelon Services, with its broad mix of external relationships and value-based arrangements, is less affected. The company is adjusting long-term margin expectations for CarelonRx to mid-single-digits, reflecting the growth in large upmarket jumbo accounts and specialty business, alongside a prudent view of policy changes.

    06

    Operational Enhancements and Technology Integration

    Elevance Health is investing in advanced analytics to anticipate utilization trends and improve care coordination, particularly in high-cost areas like substance use disorder treatment. Key initiatives include strengthening specialty pharmacy management, expanding behavioral health support, and enhancing care management programs. The company is also committed to improving the provider experience, aiming for 80% of prior authorization decisions to be made in real time by 2027 through its HealthOS platform.

    07

    Long-Term Margin Recalibration and Growth Outlook

    The company has recalibrated its long-term margin targets, setting an enterprise target of 5% to 6% and mid-single-digit targets for Health Benefits, Carelon, and CarelonRx. These adjustments reflect the current portfolio mix and a prudent outlook on the operating environment, without altering the underlying margin expectations for individual lines of business. Management remains confident in its long-term algorithm of at least 12% adjusted EPS growth annually, expecting to return to this level in 2027.

    AI-generated summary of the company’s earnings call. Not investment advice.