Elevance Health joined UnitedHealth Group, citing Centers for Medicare & Medicaid Services timing mismatches as a significant drag on earnings.
For the third quarter, Elevance reported a net income of $1 billion, down 22.5% from $1.3 billion during the same period in 2023. Despite this quarterly decline, net income for the nine months ending September 30 reached $5.5 billion, up from last year’s $5.1 billion.
Shares of Elevance dropped 12% on Thursday after the health insurer lowered its full-year earnings forecast, according to Seeking Alpha. President and CEO Gail K. Boudreaux highlighted the challenges posed by Medicaid, specifically pointing to the timing mismatch between Medicaid reimbursement rates and patient acuity, a headwind also noted by UnitedHealth Group earlier this week.
Boudreaux commented, “We remain confident in the long-term earnings potential of our diverse businesses as we navigate a dynamic operating environment and unprecedented challenges in the Medicaid business. We expect Medicaid rates to eventually align with our members’ needs and are taking proactive steps to enhance operational efficiencies, ensuring we emerge stronger.”
According to Seeking Alpha, Elevance faced higher-than-expected medical expenses in the third quarter, but revenue still grew, driven by higher premium yields in its Health Benefits segment and increased CarelonRx product revenue. This growth was partially offset by membership attrition in the Medicaid business.
Shares of other peer insurers also saw premarket declines: Molina Healthcare (-11.18%), Centene Corporation (-8%), CVS Health (-1.68%), and Humana (-2.18%).
Earlier this week, during UnitedHealth’s earnings call, CFO John Rex raised concerns about the “pronounced upshift in coding intensity by hospitals.” He noted that some providers have significantly increased their coding intensity by more than 20%, contributing to rising costs across the health system. Additionally, Rex pointed to the rapid acceleration in the prescribing of high-cost specialty medications, particularly those treating cardiovascular disease, autoimmune disorders, and cancer, partly driven by the Inflation Reduction Act’s elimination of the individual coinsurance requirement during the catastrophic coverage phase.
