Elevance cuts forecast as rising costs hit health insurers
In the last three months, peers UnitedHealth Group(UNH.N), opens new tab, Centene(CNC.N), opens new tab and Molina Healthcare(MOH.N), opens new tab have all issued warnings of elevated costs across government-backed insurance plans ahead of the typical earnings season.
Indianapolis, Indiana-based Elevance - the first major health insurer to report second-quarter earnings - flagged higher-than-anticipated costs in its individual plans that conform to the Affordable Care Act, known as Obamacare, and its Medicaid plans for low-income people.
Such mismatches reflect a higher use of healthcare services and rising costs of medical procedures, heightening the pressure on insurers already hurt by new regulatory and funding pressures in government plans in the last year.
UnitedHealth in May had said it witnessed the trend from members enrolled in its federal-government-backed Medicare Advantage plans for those aged 65 and older. Centene and Molina had flagged higher costs for their state and federally-funded Medicaid plans and in Obamacare.
Elevance on Wednesday said it sees annual adjusted profit of about $30 per share, compared with $34.15 to $34.85 per share it previously expected.
The company said it expected additional changes to membership enrollment from new regulation under U.S. President Donald Trump's administration, and it expects states' reimbursement rates to price for those changes faster than they did following the COVID-19 pandemic.
Wall Street analysts said the forecast cut was largely in the range that investors were expecting going into the quarter.
Leerink Partners analyst Whit Mayo said the updated forecast for profit and medical loss ratio provides "a better reset" for Elevance but remains cautious due to the overall challenging environment for the sector.
Elevance forecast full-year medical loss ratio, a closely watched metric which tracks medical costs, to be about 90%, reflecting the ongoing industry-wide trend of higher costs on Medicaid and Obamacare plans.
For the quarter, Elevance reported a medical loss ratio, the percentage of premiums spent on medical care, of 88.9% compared to analysts' estimates of 88.70%.
Elevance banks more on commercial and Medicaid health plans, which cover medical expenses for people with low income with about 19.1% of its members coming from Medicaid as of June 30.
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