Elevance Health Q2 Earnings Call Highlights
Key Points
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- Elevance Health raised its 2026 adjusted EPS outlook after Q2 results beat expectations, now guiding to at least $27 per share and signaling confidence in returning to at least 12% adjusted EPS growth in 2027.
- Medicaid remains the biggest pressure point, with the company keeping its full-year margin outlook at about negative 1.75% and saying 2026 should be the trough year before improvement from better rate alignment and cost actions.
- Medicare Advantage, ACA, and Carelon are supporting growth, with stronger-than-expected Medicare Advantage performance, ACA membership tracking ahead of plan, and continued expansion of Carelon health services.
Elevance Health (NYSE:ELV) raised its 2026 adjusted earnings outlook after second-quarter results came in ahead of management’s expectations, citing favorable benefit expense performance, disciplined cost management and improving execution across several major business lines.
President and CEO Gail Boudreaux said the company now expects 2026 adjusted diluted earnings per share of at least $27. Chief Financial Officer Mark Kaye said Elevance views at least $26 as the appropriate 2026 earnings baseline for modeling purposes and remains confident in returning to at least 12% adjusted EPS growth in 2027 off that higher baseline.
For the second quarter, Elevance reported adjusted diluted earnings per share of $7.45. Operating revenue was $49.8 billion, up 0.8% from a year earlier, driven by higher premium yields and product revenue, partly offset by lower health plan membership. The company ended the quarter with 44.9 million medical members, with the sequential decline attributed mainly to a known fee-based customer transition and attrition in its individual ACA and Medicaid businesses.
Medicaid Remains a Key Focus as Margins Stay Under Pressure
Management spent much of the call addressing Medicaid, where Boudreaux said the operating environment remains “dynamic.” Elevance maintained its full-year Medicaid operating margin outlook of approximately negative 1.75%, even as rate updates received during the quarter were stronger than anticipated.
Kaye said Medicaid cost drivers remain elevated and concentrated in previously identified areas, including behavioral health, specialty pharmacy, outpatient surgery and emergency department utilization. He said the company is not seeing a new “stepwise acuity reset,” adding that membership and acuity remain broadly aligned with assumptions. Instead, incremental pressure is increasingly tied to utilization among members who remain in the program.
Management reiterated that 2026 is expected to be the trough year for Medicaid margins, with improvement over time supported by better rate alignment and the maturation of care management actions. Kaye said the second-half Medicaid margin profile is expected to improve from the second quarter, supported by favorable July 1 rate activity and continued execution against cost pressures.
Boudreaux also said Elevance recently reached a mutual agreement with the District of Columbia to exit the D.C. Medicaid market. She said the company expects to exit additional Medicaid markets over the next 12 to 18 months where it does not see a path to sustainable performance. Executives did not identify the additional markets or provide sizing for potential exits.
Medicare Advantage and ACA Help Drive Second-Quarter Outperformance
Elevance said Medicare Advantage results were stronger than expected and contributed to the company’s quarterly outperformance. Boudreaux said deliberate actions taken to reposition the portfolio — including disciplined plan design and a more focused mix of dual-eligible special needs plans and HMO products — are translating into stronger performance.
The company said it remains on track for at least a 2% operating margin in Medicare Advantage this year. Aimée Dailey, president of Government Health Benefits, said Elevance’s 2027 bids were developed with a prudent view of trend and a continued focus on sustainable margin improvement. She said the company continues to believe underlying medical cost trend is outpacing program funding.
In the individual ACA business, management said performance is developing broadly in line with how the year was priced and planned. Kaye said second-quarter favorability reflected more pronounced seasonality tied to a higher mix of bronze plans, as well as favorable final 2025 CMS risk adjustment results relative to prior estimates. However, he said Elevance is not extrapolating that favorability into 2026 and is reestablishing much of the prior-year favorability in its current-year risk adjustment accrual.
Kaye said member retention in ACA remains modestly ahead of expectations and that Elevance now expects to end 2026 with at least 1 million individual ACA members.
Commercial Business and Carelon Remain Growth Priorities
In commercial health benefits, management said performance was in line with expectations, with cost trend remaining elevated but consistent with the company’s pricing approach. Morgan Kendrick, president of Commercial Health Benefits, said the market remains focused on affordability and simplicity, and that Elevance’s assets are resonating with employers.
Kendrick said the company’s fee-based and self-funded commercial businesses are performing well, including both local market and national account activity. He said Elevance had a record year in national accounts for 2026 and that its pipeline for 2027 is nearly as large. He also said some customers that left the company in prior years have returned.
Carelon also remains a focus of Elevance’s growth strategy. Boudreaux said CareBridge, which extends Carelon’s whole-health model into the home, can generate medical savings in the mid-teens for members and is being expanded into new markets. She also said Carelon behavioral health programs have delivered average cost savings of 10% through stronger member engagement and fewer adverse events.
Company Plans One-Time Investments From Non-Recurring Benefit
Kaye said Elevance recorded a net below-the-line benefit of $0.80 per share in the quarter, primarily related to valuation adjustments within net investment income. Management said it plans to use that non-recurring benefit to fund one-time investments in the second half of the year.
Boudreaux said the investments are focused on strengthening medical cost management, member engagement, provider connectivity, operating efficiency and Carelon’s integrated capabilities. She said the company is using data and AI-enabled tools to identify medical cost pressures earlier and respond more quickly with targeted clinical, network, payment integrity and operating actions.
Executives emphasized that these incremental investments are one-time and will not recur in 2027. Kaye said the company’s 2026 outlook already included approximately $0.75 per share of targeted investment spending that is part of the ongoing run rate, separate from the new $0.80 per share of accelerated investments funded by the below-the-line benefit.
Cash Flow Outlook Raised; CMS Matter Closed
Elevance reported second-quarter operating cash flow of $1.9 billion. Kaye said cash flow benefited from strong operating performance and the timing of a state Medicaid pass-through payment received in the quarter and remitted in July. The company raised its full-year operating cash flow outlook to at least $6 billion.
Days in claims payable were 45.4 days as of June 30, up 2.9 days from a year earlier. Kaye said the company remains confident in its reserving levels and described its reserve posture as consistent and prudent.
Kaye also said Elevance made an initial remittance of $342 million to CMS in the second quarter related to a matter discussed on the prior quarter’s call. He said the estimate of potential total financial exposure remains unchanged. As of July 9, Elevance completed all steps required by CMS and subsequently received written confirmation that sanctions will not be imposed and the matter is closed.
Boudreaux closed the call by saying Elevance’s confidence in 2027 is based on the breadth of the enterprise rather than any single line of business. She pointed to commercial pricing discipline, Medicare Advantage portfolio actions, ACA execution, expected Medicaid improvement, Carelon growth, operating efficiency and capital deployment as contributors to the company’s earnings path.
About Elevance Health (NYSE:ELV)
Elevance Health, Inc (NYSE: ELV) is a large U.S.-based health benefits company that provides a broad range of health insurance products and related services. Headquartered in Indianapolis, the company rebranded from Anthem, Inc to Elevance Health in 2022 while continuing to operate consumer-facing health plans under established state and national brands. Gail Boudreaux serves as chief executive officer and president, leading the company's strategic focus on integrated health care and benefit delivery.
Elevance's core activities include offering medical and specialty health plans for individuals, employers and government programs, including Medicare and Medicaid managed-care products.
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