Elevance Lowers 2024 Guidance Amid Rising Medical Utilization and Regulatory Headwinds
Elevance Health, a major Indianapolis-based health insurer covering nearly 46 million Americans, has revised its 2024 earnings outlook downward amid accelerating medical utilization and regulatory challenges impacting government health programs. Post-COVID-19 pent-up demand surged in 2023 and intensified in 2024, driving up medical costs across Medicaid and the Affordable Care Act (ACA) plans. Regulatory shifts such as resumed Medicaid eligibility checks and stricter Medicare Advantage risk adjustment have further complicated demand forecasting and risk management for payers. Elevance now expects adjusted earnings per share of around $30 for the year, down from the earlier projection of at least $34.15, reflecting broad sector pressures confirmed by peers UnitedHealth, Centene, and Molina, which also lowered their guidance recently.
The combination of resumed Medicaid eligibility verification and financial barriers for ACA enrollees has contributed to a higher acuity population within both programs. Behavioral health, specialty pharmacy, and emergency room utilization notably increased, with ACA members exhibiting nearly double the emergency room usage compared to commercial enrollees. Provider billing behaviors also intensified, including increased use of dispute resolution mechanisms under the No Surprises Act, prompting Elevance to pursue litigation against certain providers over billing practices.
Looking ahead, significant policy changes introduced under the "One Big Beautiful Bill" signed into law in July 2024 are expected to cut $1 trillion from Medicaid funding, implement work requirements, tighten ACA enrollment and subsidy qualifications, and potentially reduce the ACA market size by millions of enrollees. These changes present heightened uncertainty for payers as insurance risk pools are anticipated to shrink and become higher acuity, compelling Elevance to raise premiums for 2025. Medicaid enrollment pressures due to work mandates are expected to be manageable over time, with states adjusting payment rates to reflect utilization trends.
Medicare Advantage (MA) remains a stable segment for Elevance, with cost trends largely meeting expectations amidst broader industry stresses. The insurer is also strategically emphasizing managed care products such as HMOs and dual Medicare-Medicaid plans, which offer improved spending control and higher margins. Elevance reported a second-quarter medical loss ratio (MLR) of 88.9%, up from 86.3% the prior year, pointing to rising claims costs that exceeded premium increases. While health benefits revenue grew 12% to $41.6 billion on rate hikes, operating income declined by 27% due to escalating medical expenses.
On a positive note, Elevance’s health services segment, Carelon, outperformed expectations with a 29% year-over-year increase in operating income to $900 million, driven in part by the recent CareBridge home health acquisition. Elevance’s ongoing adaptations to shifting regulatory, utilization, and enrollment dynamics underscore the complex environment facing managed care organizations as they navigate evolving market and policy landscapes.