Elevance Health, Inc.

What they do

Elevance operates risk-based managed care plans for Individual, Employer Group, Medicaid and Medicare markets, plus fee-based administrative services for self-funded employers and the Federal Employee Program. It also sells pharmacy and healthcare services to both affiliated and unaffiliated customers through CarelonRx and Carelon Services. It reports four segments: Health Benefits, CarelonRx, Carelon Services, and Corporate & Other.

Revenue drivers

• Health Benefits premiums — Risk-based premium revenue from Individual, Employer Group risk, Medicare, Medicaid and FEP members; the core of consolidated operating revenue, and in 2Q 2026 the company cited higher premium yields here as a driver of the $49.8 billion quarterly revenue.
• CarelonRx — Pharmacy services and product revenue, including ingredient costs net of rebates for unaffiliated pharmacy customers; 2Q 2026 revenue growth was partly attributed to higher CarelonRx product revenue.
• Carelon Services — Other healthcare-related service fees and integrated solutions sold to affiliated and unaffiliated plans; described as the company's healthcare-related services capabilities alongside CarelonRx.
• Fee-based and administrative services — Service fees from self-funded employers, claims processing, network access, medical management, stop-loss and Medicare processing, including the Federal Employee Program.

Recent performance

Second quarter 2026 operating revenue was $49.8 billion, up 0.8% from $49.4 billion a year earlier. Diluted EPS was $6.71 and adjusted diluted EPS was $7.45, helped by favorable benefit expense performance and an approximately $0.80 per share net below-the-line benefit. The benefit expense ratio rose 80 basis points year over year to 89.7%, driven by elevated medical cost trend in Government businesses, partly offset by improved Individual ACA performance. Operating margin was 3.5% versus 4.9% a year ago, and operating cash flow was $1.9 billion for the quarter. Full-year 2025 revenue was $199.13 billion with net income of $5.66 billion.

Strategy

Management is accelerating targeted investments in medical cost management, member experience, provider connectivity, operating efficiency and Carelon's value-based solutions. The company says these actions are intended to lower healthcare costs, simplify the member and provider experience, and strengthen Carelon's integrated solutions. On Medicaid, it is working on program improvements with states, strengthening care and network management, optimizing clinical strategy and enhancing payment integrity. Capital return continued in 2Q 2026 with 0.7 million shares repurchased for $234 million at a $344.62 weighted average price and a $1.72 per share quarterly dividend.

Risks

• Medical cost trend — The company's profitability depends on predicting and pricing healthcare costs, and 2Q 2026 saw the benefit expense ratio rise to 89.7% on elevated Government business cost trend.
• Medicaid and Individual ACA morbidity — Membership shifts from Medicaid into Individual ACA after redeterminations, and lower effectuation rates in highly subsidized geographies, have driven market-wide morbidity increases and elevated Medicaid cost trends.
• Membership declines — 2Q 2026 revenue growth was partly offset by anticipated declines in Medicare Advantage, Medicaid and Employer Group risk membership.
• Government program dependence — The company states that Medicare and Medicaid revenues depend in whole or in part on government programs, exposing it to legislative, regulatory and rate changes.

Outlook

Management raised FY 2026 guidance to diluted EPS of at least $20.10 and adjusted diluted EPS of at least $27.00, citing strong second quarter operating results. It also raised FY 2026 operating cash flow guidance to at least $6.0 billion. The company says it expects to return to at least 12% adjusted EPS growth in 2027 off the 2026 earnings baseline.