Elevance Health shares tumble on indication of rising medical costs

Elevance Health (NYSE:ELV) shares dropped as much as 7% in morning trade, most in a year, as the company signaled towards rising medical costs, forecasting 2024 adj profit below expectations despite a beat in second quarter results.

During post earnings call, CEO Gail Boudreaux said, “Our Medicaid membership mix has shifted, resulting in increased acuity and we are working actively with our state partners to ensure rates remain actuarially sound.”

The managed care player expects full year adjusted profit per share to be at least $37.20, slightly below consensus of $37.28.

On Tuesday, industry bellwether UnitedHealth (UNH) beat Wall Street estimates with its Q2 2024 results and raised full year forecast, but also indicated towards rising medical costs in its post earnings call.

The company reported second quarter adjusted profit of $10.12 per share, beating analysts’ expectations by $0.11, while its operating revenue of $43.2 billion for the quarter fell $0.2 billion compared to the prior year quarter.

“This decrease was driven by attrition in Medicaid membership, partially offset by higher premium yields to reflect medical cost trend, and growth in CarelonRx product revenue related to members served,” the company said in a statement.

Elevance reported benefit expense ratio of 86.3%, an improvement of 10 basis points, driven primarily by premium rate adjustments to cover medical cost trend in our Health Benefits business.

Shares of other Medicaid focused insurers, including Centene Corp (CNC) and Molina Healthcare (MOH) also fell after the call.