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Elevance Health Inc. on Thursday morning reported a third-quarter profit of $1.01 billion, down 22% from the same quarter a year ago, as total medical membership fell by 1.5 million and the company paid out more in claims.
Elevance’s shares tumbled about 12% in premarket trading Thursday morning, to $437 each by 7:40 a.m. Shares traded at $439.47 each, down 11.6%, shortly after 1 p.m.
The Indianapolis-based health insurer reported a profit of $4.36 a share. Adjusted for one-time events, profit came in at $8.37 a share.
That missed Wall Street’s expectation by a wide margin. The average estimate of 17 analysts was $9.70 a share, according to Zacks Investment Research.
The company said it expects full-year earnings to be $33 a share, down from $37.20 projected in the second quarter.
“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,” CEO Gail Boudreaux said in written remarks. “We expect Medicaid rates will align with the needs of our members in time and are taking proactive actions to enhance operational efficiencies that will ensure we emerge from this period even stronger.”
The company, formerly known as Anthem Inc., posted revenue of $45.1 billion, up 5.3%, beating Wall Street expectations. But expenses climbed to $43.7 billion, up 6.2%, eating into profit.
Elevance said overall medical membership totaled about 45.8 million as of Sept. 30, a decrease of about 3% from the same quarter in 2023, driven by attrition in its Medicaid business, associated with eligibility redeterminations and footprint adjustments in certain Medicaid states.
The company’s benefit expense ratio was 89.5%, an increase of 270 basis points, driven primarily by greater need for medical care by its Medicaid members.
The losses were partially offset by growth in employer group fee-based and Affordable Care Act health plan membership.
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 that 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,” 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 competitor 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.
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In 2020 Elevance was the second largest Medicaid insurer with 11-percent of the market. Number one was Centene with twice as many insureds. United Health was close behind Elevance with 9-percent. As the story explains, exiting the Covid-era boomtimes is exacting a toll not just on Elevance (loosing 19-percent of its enrollees), but is something all Medicaid providers are having to deal with.