Elevance Health (NYSE:ELV) executives emphasized “execution and repositioning” as the central theme for 2026, outlining a guidance framework that reflects portfolio actions across Medicaid, Medicare Advantage, and the individual ACA market alongside continued investment in Carelon. On the company’s fourth-quarter 2025 earnings call, management also reiterated expectations to return to at least 12% adjusted EPS growth in 2027 off its ending 2026 earnings baseline, supported by multiple business levers rather than any single assumption.
2026 guidance and the role of non-recurring items
Elevance Health established 2026 adjusted diluted earnings per share guidance of at least $25.50. CEO Gail Boudreaux noted that 2025 results included approximately $3.75 per share of favorable non-recurring items, which management highlighted as important for year-over-year comparisons.
Fourth-quarter financial results and capital deployment
For the fourth quarter, operating revenue totaled $49.3 billion, up 10% year over year, driven by premium rate adjustments reflecting higher cost trends and acquisitions completed in the past year. The consolidated benefit expense ratio was 93.5% for the quarter and 90% for the full year, in line with guidance. The adjusted operating expense ratio was 10.8% for the quarter and 10.5% for the full year.
The company ended 2025 with 45.2 million members, a decline of about 500,000 year over year, primarily due to lower Medicaid membership tied to eligibility reverifications.
Operating cash flow was $4.3 billion in 2025, or approximately 0.8 times GAAP net income. Kaye said December cash flow was negatively impacted by the timing of certain Medicaid-related payments that were received in early January, and the company expects 2026 operating cash flow of at least $5.5 billion. Days in claims payable were 41.3, and management expects the metric to remain in the low 40s in 2026.
Elevance repurchased 1.4 million shares in the fourth quarter for $470 million, bringing full-year repurchases to $2.6 billion. Combined with dividends, the company returned $4.1 billion of capital to shareholders in 2025. For 2026, the company plans to allocate approximately $2.3 billion toward share repurchases.
Membership and margin repositioning across Medicaid, Medicare, and ACA
Management described 2026 as a trough year for Medicaid. Boudreaux said rates continue to lag elevated acuity and utilization, and the company is working with state partners on rate actions and program design changes. Elevance expects a Medicaid operating margin of approximately -1.75% in 2026, with improvement over time as rates incorporate more current experience and company actions take hold.
Felicia Norwood, president of Government Health Benefits, said the company is contemplating a composite Medicaid rate increase in 2026 in the mid-single-digit percentage range (net of certain known risk corridor impacts), but that rates are still expected to lag trend given attrition and shifting risk pools tied to reverification activity.
On Medicaid membership, management guided to a decline of about 750,000 members in 2026 and characterized the expectation as “same store,” reflecting continued eligibility reverification and related program changes rather than state exits or contract terminations.
In Medicare Advantage, Boudreaux said the company expects membership to decline in the high teens percentage range in 2026, reflecting deliberate portfolio actions and stability in dual-eligible membership. Norwood said the company’s annual election period results aligned with a margin-focused repositioning, with most attrition occurring in PPO products and certain HMO geographies where comparable alternatives were not offered. She said the company is positioned to deliver meaningful Medicare margin improvement to at least 2% in 2026.
For the individual ACA business, Kaye said the company repositioned for higher expected morbidity following the expiration of enhanced subsidies, and management expects some healthier members to exit and the remaining population to become more acute. The company guided to at least 900,000 individual ACA members at year-end 2026. Kaye said membership coming out of open enrollment was up about 10%, and he pointed to effectuation rates—premium payments and lapse behavior—as the key swing factor, typically becoming clearer through early April.
In commercial, management emphasized pricing discipline and margin thresholds. Kaye said employer group risk membership is expected to end 2026 down in the high single-digit percentage range, driven by deliberate pricing decisions including in some lower- or negative-margin public sector business. Executives also pointed to strength in self-funded national accounts, including wins via the “Second Blue Bid” process; Morgan Kendrick said the company had about 11 second-blue bids for 2026 and won 9.
Carelon demand, mix shifts, and updated long-term margin targets
Executives said Carelon continues to see strong demand, particularly in high-cost and complex areas, but near-term growth is expected to be moderated by lower health plan membership, most pronounced in CarelonRx. Kaye said 2026 guidance reflects both membership headwinds and investments to scale dispensing and home health assets.
Pete Haytaian, president of Carelon, said the company is adjusting longer-term CarelonRx margin expectations, attributing the shift to the composition of growth—such as more large “upmarket jumbo accounts”—and ongoing expansion in specialty pharmacy, which he said carries a lower margin profile. He also said the company is taking a prudent view given the policy environment.
Regarding Carelon Services, Haytaian said Carelon is disciplined in taking risk, describing a mix of fee-based and risk-based arrangements, including assuming risk on a category-of-care basis in some instances and whole-health risk in others, with protections such as risk corridors. He cited offerings including serious mental illness, oncology, and CareBridge as examples of risk offerings intended to deliver value on cost and quality.
Elevance also updated its long-term margin framework, stating a long-term enterprise margin target of 5% to 6%. Management said it is targeting mid-single-digit margins for health benefits, Carelon, and CarelonRx, with the Carelon Services target unchanged. Kaye said the adjustment in the health benefits segment reflects business mix—such as individual ACA representing a larger share relative to group commercial—rather than a change in underlying line-of-business margin expectations.
Cost trend assumptions, seasonality, and outlook drivers
Responding to questions about medical cost trends, Kaye said fourth-quarter medical cost performance was generally in line to slightly better than expectations, with modest variations by line of business. For 2026 assumptions:
- Commercial large group: elevated but stable trend environment, with cost patterns and margins largely consistent with 2025.
- ACA: accelerating cost trends, with expected risk pool acuity increases tied to the expiration of enhanced subsidies.
- Medicaid: continued pressure with some moderation versus 2025, planning for mid-single-digit trend but still above historical norms and with rates lagging.
- Medicare: higher reported cost trends expected in 2026, largely driven by membership mix including a greater emphasis on D-SNP.
Kaye also said the company saw a meaningful uptick in influenza-like activity in December that had a modest adverse impact on the fourth-quarter benefit expense ratio, and Elevance embedded an expected first-quarter 2026 headwind of about 20 basis points from flu.
For 2026, the company expects operating revenue to decline in the low single-digit percentage range, driven by a low double-digit percentage decline in risk-based membership, partly offset by higher premium yields and growth in Carelon. The consolidated medical loss ratio is expected to be 90.2%, plus or minus 50 basis points, and the adjusted operating expense ratio is expected to be 10.6%, plus or minus 50 basis points.
Management also highlighted earnings seasonality, expecting to earn about two-thirds of 2026 adjusted EPS in the first half, with 65% of that coming in the first quarter.
Looking to 2027, Boudreaux and Kaye reiterated expectations to return to at least 12% adjusted EPS growth off the ending 2026 baseline, describing the path as supported by several levers across commercial, Medicare, Carelon, and Medicaid, as well as pricing, care management, and portfolio actions already underway.
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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