Elevance Health Q2 profit dips due to Medicaid, ACA costs

Elevance Health reported $1.7 billion in profit during the second quarter, down 24% from Q2 2024, which was enough to drive shares in the company down slightly this week.

The insurer brought in $2.3 billion in profit in Q2 last year. The lower performance this year resulted in $8.84 in earnings per share, with the Associated Press reporting this fell short of Wall Street’s expectations, with investors anticipating $9.16 per share.

Profits are also down mid-year compared to last year. Elevance has earned $3.9 billion in profit so far this year, a 13.6% decrease from the roughly $4.5 billion it tallied through the first six months of 2024.

Though profits were down, Elevance did overperform on revenue; while analysts had predicted $48.2 billion in revenue, the company posted $49.8 billion in revenue, a 13% increase over Q2 2024.

CEO Gail Boudreaux attributed this performance to higher costs in the Affordable Care Act’s marketplaces, as well as elevated Medicaid costs.

“We are updating our outlook to reflect elevated medical cost trends in ACA and slower rate alignment in Medicaid,” said Boudreaux. “While the external environment continues to evolve, we are focused on the areas within our control - managing healthcare costs, deploying targeted investments in advanced technology and value-based care delivery, and reinforcing the operational foundation that supports long-term value creation.”

Boudreaux predicted Elevance would achieve at least 12% average annual growth in adjusted dilated EPS “over time.”

Elevance now expects 2025 GAAP net income per diluted share to be about $24.10, and adjusted net income per diluted share to be about $30.00.

WHAT’S THE IMPACT

The benefit expense ratio was 88.9% in the quarter, an increase of 260 basis points year over year. The operating expense ratio was 10.1%, an improvement of 160 basis points. The adjusted operating expense ratio was 10%, an improvement of 140 basis points, due to revenue growth and “expense discipline.”

Operating cash flow was $3.1 billion year-to-date, an increase of $0.6 billion over last year. 

Elevance touted the performance of its health benefits segment, which saw operating revenue of $41.6 billion in Q2, a $4.4 billion (12%) increase year-over-year, which the company attributed to higher premium yields, recently closed acquisitions and growth in Medicare Advantage membership, partially offset by lower Medicaid membership.

Operating revenue for Carelon was $18.1 billion in the second quarter of 2025, an increase of $4.8 billion, or 36% compared to the prior year quarter. This, said Elevance, was driven by recent acquisitions in home health and pharmacy services, growth in CarelonRx product revenue, and the scaling of risk-based capabilities in Carelon Services.

THE LARGER TREND

Elevance Health was sued by the federal government in May, along with Aetna and Humana, for allegedly paying millions of dollars in kickbacks to insurance brokers eHealth, GoHealth and SelectQuote. 

The brokers allegedly directed Medicare beneficiaries to the plans that paid them the most in kickbacks, regardless of the suitability of the plans for the beneficiaries, according to the Department of Justice.

The United States is asking for civil penalties and a jury trial in the complaint brought in federal court in Massachusetts.