Elevance Health Inc. (ELV) reported third-quarter revenues of $44.7 billion, exceeding analysts’ expectations of $43.33 billion. This growth was fueled by increased premium yields in the Health Benefits segment and expansion of CarelonRx product revenue. However, the company faced headwinds from membership attrition in its Medicaid business.
The company’s earnings per share (EPS) guidance for the year was lowered to $33.00, falling short of the previous forecast of at least $37.20 and the consensus estimate of $37.26. This disappointment stemmed from a higher-than-expected benefit expense ratio, reaching 89.5%, driven by a mismatch between Medicaid rates and the increased acuity of members.
Elevance Health’s stock took a significant hit, declining by 12.12% to $436.64 at the close of trading on Thursday. The company’s weaker-than-expected performance and revised guidance raised concerns among investors, contributing to the stock’s decline.
Evolent Health, Inc. (EVH), a provider of services to managed care organizations, also saw its stock price drop by 5.54% to $25.05. William Blair, a prominent investment firm, noted that large managed care organizations (MCOs) are grappling with pressure related to Medicaid utilization. They face challenges in aligning premiums received from states with actual medical expenses, particularly in the wake of the redeterminations process. This discrepancy has created a strain on their financial performance.
However, William Blair expects this issue to be temporary. MCOs are working closely with state partners to recalibrate their pricing models, aiming to bridge the gap between payments and medical expenses.
Despite the current challenges, William Blair remains optimistic about Evolent Health’s long-term prospects. They believe Evolent’s services offer a compelling value proposition to healthcare plans, particularly in the Medicare Advantage and Medicaid segments.
The analyst believes that the recent decline in Evolent Health’s stock price is largely due to investor concerns about rising medical costs impacting the company’s at-risk performance suite. These concerns are likely temporary as MCOs navigate the complexities of Medicaid utilization and adjust their pricing strategies accordingly.
This news highlights the intricate challenges faced by healthcare providers in balancing profitability with the evolving needs of Medicaid beneficiaries. As the industry continues to grapple with these complexities, the performance of companies like Elevance Health and Evolent Health will be closely monitored by investors.