Elevance faces ‘unprecedented’ Medicaid challenges: 7 things to know

The company reported its third quarter earnings Oct. 17. The company cut its earnings outlook for 2024 from $37.20 in net income per diluted share to $33, primarily due to slimmer Medicaid margins. 

On a call with investors, Elevance Health CEO Gail Boudreaux said the company expects a “timing disconnect” between acuity in the company’s Medicaid population and state payment rates. 

Here are seven things to know: 

1. Elevance Health’s Medicaid membership has declined by 20% since the third quarter of 2023. According to KFF, Medicaid membership has declined by 15% nationwide since 2023, when states began disenrolling Medicaid beneficiaries for the first time since continuous enrollment requirements took effect during the COVID-19 pandemic.
2. Medical costs in Medicaid are three to five times higher than historical averages, Ms. Boudreaux said. States are often using data that is more than a year old to determine Medicaid rates. 
3. Other insurers have also said the impacts of Medicaid redeterminations are hurting their margins. On Oct. 15, UnitedHealth Group CFO John Rex said the company was also experiencing a “timing mismatch” between acuity and rates. Insurers have said members who remain enrolled in the Medicaid program after redeterminations tend to have higher medical costs.
4. Ms. Boudreaux said the shift in Medicaid membership is “unprecedented,” but said the company still believes the Medicaid business is attractive in the long-term.
5. Elevance CFO Mark Kaye said the company’s Medicaid business is expected to be profitable in 2024, but below the company’s target margin.
6. Elevance Health’s medical loss ratio in the third quarter was 89.5%, up from 86.8% in the same time period last year. Based on Medicaid expenses, Mr. Kaye said the medical loss ratio will likely be a percentage point higher for 2024 than it projected at the beginning of the year. 
7. Ms. Boudreaux told investors the Medicaid challenges are “time bound.”

   “Our state partners are working constructively with us on rate renewals,” Ms. Boudreaux said. “We’re confident that rates will ultimately reflect the underlying acuity of our members, albeit on a lag, as states often use data that’s more than a year old when setting rates.