Elevance makes a late cut to its 2024 forecast after seeing trouble in Medicaid

INDIANAPOLIS (AP) — Elevance Health surprised Wall Street with a rare, late-year guidance cut Thursday after a jump in Medicaid costs marred its third quarter.

Shares of the Blue Cross-Blue Shield insurer tumbled after it joined rival UnitedHealth in noting that rates it receives for managing government-funded Medicaid programs weren't enough to offset a rise in costs.

Elevance dropped its forecast for 2024 adjusted earnings to approximately $33 per share after predicting at least $37.20 in July.

Wall Street was expecting $37.25 per share, according to the data firm FactSet.

UnitedHealth also tightened its forecast when it reported third-quarter results Tuesday. Insurers typically act conservatively with forecasts this late in the year and focus on signaling to investors how the coming year will play out.

With more than 8.9 million people enrolled, Elevance is one of the country’s biggest insurers in Medicaid, which pays for health care for people with low incomes. States hire insurers to manage their Medicaid programs.

Elevance said Thursday its Medicaid enrollment tumbled 19% from 11 million people in last year’s third quarter. States have been going through a process to redetermine Medicaid eligibility after enrollment in the program swelled during the COVID-19 pandemic.

That process led to an unfavorable shift in Medicaid membership, Elevance said, which hurt the operating gain for its health benefits business.

“We have not had an environment like this before in Medicaid,” CEO Gail Boudreaux told analysts during a call to discuss the company's third quarter.

Insurers have been wary of a shift in who is eligible for Medicaid over concerns that healthier people would be removed from enrollment, leaving a higher concentration of people who use the coverage and generate claims.

Both Elevance and UnitedHealth say the rates they receive for managing Medicaid have not caught up with changes in costs because states use old data to set rates.

Elevance expects this mismatch to continue into 2025, company leaders said Thursday. But Boudreaux also said they were confident the rates would ultimately catch up with claims.

Overall, Indianapolis-based Elevance's profit slipped 21% in the recently completed third quarter to $1.02 billion. Operating revenue, which excludes investment gains, rose 5% to $44.72 billion.

Adjusted earnings totaled $8.37 per share.

Analysts expected $9.66 per share on $43.47 billion in revenue.

Shares of Elevance Health Inc. tumbled 12%, or $60.84, to $436.12 late Thursday morning while broader trading indexes rose slightly.

Elevance shares had reached an all-time high price of $567.26 in early September, according to FactSet.