Dive Brief:
- Elevance became the second major insurer to predict declining revenue in 2026 on Wednesday, as for-profit payers continue to shave off members to try and recover margins.
- The Indianapolis-based insurer estimated its operating revenue will drop by a low-single digit percentage next year. The guidance comes one day after UnitedHealth forecast an annual revenue decline for the first time in more than three decades, sparking a selloff of managed care stocks that continued into Wednesday.
- Elevance also projected adjusted diluted earnings per share of at least $25.50, compared to the $30.29 it posted in 2025. Analysts said the insurers are setting attainable guidance to rebuild investor confidence after a difficult few years for the sector.
Dive Insight:
Alongside its fourth quarter results, Elevance issued an outlook that followed through on warnings the company gave investors in the fall: That profits could be constrained in 2026.
Elevance expects premiums to fall this year as it sheds members, and earnings to dip amid continued cost pressures especially concentrated in Medicaid, executives said on a Wednesday morning call with investors.
The outlook was below analysts’ consensus expectations, but leaves the company room to outperform, J.P. Morgan analyst Lisa Gill commented in a note on Wednesday.
2026 guidance is “in line with our expectations of what the company can grow from,” Gill wrote.
Notably, Elevance said it expects to grow earnings at least 12% in 2027, despite a disappointing proposed rate update for Medicare Advantage. Regulators want to keep base MA rates essentially flat next year, to the horror of health insurers, who argue they’ve had to absorb steep spending increases without adequate rate updates in federal programs.
MA makes up a relatively small slice of Elevance’s membership. The company, the second-largest U.S. payer behind UnitedHealthcare, is mostly known for operating Blues-licensed plans in 14 states under its Anthem brand.
The company has 2.2 million customers in the privatized Medicare program, accounting for just 5% of its 45.2 million total members. However, MA accounts for an outsized share of Elevance’s premiums — about 27% — so the scanty rate update, if finalized, could complicate the company’s margin recovery plans.
But actions Elevance took to revamp its MA business this year to hoist margins seem to have panned out well, executives said during a Wednesday morning call with investors.
Like many of its peers, Elevance exited unprofitable markets and steered seniors towards plans where it can more aggressively control costs for 2026. Based on outcomes from the annual open enrollment period, those actions seem to have been successful — though they’re going to cost Elevance more members than the insurer previously thought.
Elevance now expects its MA membership to drop about 18% — equating to about 400,000 people — this year.
But “from a profitability perspective I will say that the mix of the lives that we lost was very consistent with our strategy,” Felicia Norwood, who leads Elevance’s government benefits business, said. “We’re positioned to deliver meaningful Medicare margin improvement to at least 2% in 2026, which is a meaningful step up year over year.”
Elevance will see membership drops in its other businesses too.
Medicaid in particular will be pressured this year, as state payment rates continue to lag higher acuity, executives said. States have been bumping their rates over the past few years to help insurers cope with a sicker Medicaid population coming out of the coronavirus pandemic. But it just hasn’t been enough, according to payers.
Meanwhile, steep Medicaid cuts in the GOP’s “Big Beautiful Bill” will cause Medicaid membership to fall further, and could cause the population to get even sicker, CEO Gail Boudreaux suggested.
At the end of 2025, Elevance covered 8.5 million people in the safety-net insurance program. But the insurer expects to lose about 750,000 Medicaid members in 2026, a drop of about 9% that’s already following a 5% decline in 2025, Jefferies analyst David Windley wrote in a note on the results.
And unlike in MA, Elevance isn’t trading lower membership for positive margins here. Elevance’s Medicaid margins will be about -1.75% this year, according to Boudreaux.
“We continue to view 2026 as a trough year,” the CEO said.
Amid cost pressures, Elevance’s health benefits division operated at a loss of $220 million in the fourth quarter, compared to a gain of roughly the same size in the prior-year period. In particular, the company called out the ACA exchanges for heightened cost trend.
Elevance also repositioned its ACA plans in the face of higher member morbidity, securing a composite ACA rate increase of about 20% for this year, according to Windley. The loss of more generous subsidies for exchange coverage is expected to spur mostly healthy people to drop their ACA plans, saddling insurers with higher costs for members that remain.
But the rate increase should improve Elevance’s 2026 margins in the individual ACA business, CFO Mark Kaye said on the call.
Overall, Elevance reported net income of $5.6 billion in 2025, down 5% from 2024 amid rising costs. Revenue reached almost $198 billion, up 13% from 2024.
Elevance’s stock climbed 6% in Wednesday morning’s trade after the results were released, chipping away at its loss of more than 14% the day prior.
