Shares of Elevance experienced a significant decline early Thursday following the company’s announcement of a decrease in its 2024 forecast, attributed to escalating Medicaid costs. This development comes just a few months before the end of the calendar year.
The Blue Cross-Blue Shield insurer reported facing a “timing mismatch” regarding Medicaid rates and the increasing claims from its clients. As a result, Elevance revised its forecast for adjusted earnings in 2024 to roughly $33 per share, a stark drop from its previous estimate of at least $37.20 issued in July.
Market analysts had anticipated earnings of $37.25 per share, based on data from FactSet. Typically, insurers adopt a cautious approach when providing forecasts at this stage of the year, concentrating on informing investors about expectations for the upcoming year.
With over 8.9 million individuals enrolled, Elevance ranks as one of the largest Medicaid insurers in the nation. Medicaid is a jointly funded state and federal program that provides health care assistance to low-income individuals. Various states engage insurers to administer their Medicaid programs.
Elevance reported a 19% decrease in its Medicaid enrollment, with the numbers dropping from 11 million in the third quarter of the previous year. This decline followed states initiating a process to reevaluate Medicaid eligibility, a necessary step after enrollment figures surged during the COVID-19 pandemic.
The company indicated that this reevaluation process resulted in an unfavorable shift in its Medicaid membership mix, which negatively impacted the operational performance of its health benefits segment.
Insurers have expressed caution regarding the reevaluation process, fearing it could lead to the expulsion of healthier beneficiaries from their plans, leaving a higher proportion of higher-claim individuals who frequently utilize the coverage.
Overall, Elevance, based in Indianapolis, noted a 21% decrease in profits in the recently concluded third quarter, totaling $1.02 billion. However, operating revenue—excluding investment earnings—increased by 5%, reaching $44.72 billion.
Adjusted earnings amounted to $8.37 per share, but analysts had predicted around $9.66 per share on $43.47 billion in revenue.
In light of this forecast revision, shares of Elevance Inc. fell nearly 12% to $438 prior to the market opening on Thursday.