Elevance Health shares drop amid Medicare payment concerns
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Jul 19 2024
0mins
Should l Buy ELV?
Elevance Health Inc. shares fell 6.72% and hit a 5-day low as major health insurers reacted negatively to recent Medicare payment policy updates.
The Centers for Medicare & Medicaid Services (CMS) proposed a mere 0.09% payment growth for Medicare Advantage in 2027, which translates to over $700 million in additional payments. This announcement has led to significant declines in shares of major health insurers, including Elevance Health, reflecting market unease regarding future profitability in the sector. The proposed updates to the risk adjustment model and drug plan adjustments further exacerbate concerns about operational strategies for insurers.
The implications of these developments suggest a challenging environment for Elevance Health and its peers, as the proposed payment increases are seen as insufficient to support profitability. Investors may need to reassess their positions in light of these policy changes.
Trade with 70% Backtested Accuracy
Stop guessing "Should I Buy ELV?" and start using high-conviction signals backed by rigorous historical data.
Sign up today to access powerful investing tools and make smarter, data-driven decisions.
Analyst Views on ELV
Wall Street analysts forecast ELV stock price to rise
15 Analyst Rating
11 Buy
4 Hold
0 Sell
Moderate Buy
Current: 344.780
Low
332.00
Averages
389.07
High
425.00
Current: 344.780
Low
332.00
Averages
389.07
High
425.00
About ELV
Elevance Health, Inc. is a health company. It operates as a health insurer in the United States. The Company operates through four segments: Health Benefits, CarelonRx, Carelon Services and Corporate & Other. The Health Benefits segment offers a comprehensive suite of health plans and services to its Individual, Employer Group risk-based, Employer Group fee-based, BlueCard, Medicare, Medicaid and Federal Employee Program (FEP) members. The Health Benefits segment also offers health products on a full-risk basis. The CarelonRx segment includes its pharmacy services business. CarelonRx markets and offers pharmacy services to its affiliated health plan customers, as well as to external customers outside of the health plans. The Carelon Services segment integrates physical, behavioral, pharmacy, and social services by offering an array of healthcare-related services and capabilities to internal and external customers through its Carelon Health and Carelon Insights businesses.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Baupost Group's Investment Moves in Q4
- New Investment Position: Baupost Group established a new stake in Amazon during Q4, making it the fund's second-largest holding at 9.3% of assets, reflecting confidence in the e-commerce and cloud giant despite differing views from Buffett.
- Portfolio Adjustments: The fund completely exited its position in PagSeguro Digital in Q4, indicating a strategic portfolio adjustment likely based on market performance and future expectations.
- Top Holdings: As of December 31, Restaurant Brands International remains Baupost's largest holding, indicating sustained confidence in the restaurant sector, and it was also the top holding in Q3, showcasing stability.
- Market Performance Comparison: Amazon was the worst-performing stock among the Magnificent Seven in 2025, and Baupost's investment decision may be based on optimism regarding its cloud segment growth, which will test the effectiveness of Klarman's strategy against Buffett's reduction in exposure.
See More
Humana Earnings Outlook: Anticipating Updates on Medicare Advantage
- Earnings Report: Humana is set to report its fourth-quarter earnings on Wednesday.
- Industry Challenges: The insurer and its competitors are facing challenges due to proposed Medicare Advantage payment rates, which previously led to a market selloff.
See More
House Judiciary Subpoenas Health Insurers Over ACA Fraud Allegations
- Subpoena Issued: The House Judiciary Committee has subpoenaed eight health insurers, including CVS Health and Centene, requiring them to provide information related to subsidized ACA enrollees, indicating a strong focus on potential market fraud.
- Response Deadline: These insurers must respond to the subpoenas by February 23, reflecting the committee's strict demands for transparency and compliance, which could impact the operational strategies of these companies.
- Background of Prior Investigation: The subpoenas follow insufficient responses to a December request, highlighting ongoing regulatory scrutiny over potential fraud, which may lead to stricter oversight and compliance measures within the industry.
- Impact of Premium Increases: Millions of ACA enrollees are facing sharp premium hikes due to Congress's failure to extend COVID-era tax credits, potentially resulting in customer attrition and market share decline, prompting insurers to reassess their pricing strategies in response to market changes.
See More
U.S. Labor Department Pushes for Drug Pricing Transparency
- New Drug Transparency Regulation: The U.S. Department of Labor has proposed a regulation requiring Pharmacy Benefit Managers (PBMs) to fully disclose their compensation to self-insured health plans, impacting approximately 90 million Americans, aimed at eliminating hidden fees and enhancing transparency in the healthcare system.
- Targeting Hidden Fees: The regulation specifically addresses PBMs' practices such as spread pricing, rebates, and clawbacks, aiming to reduce improper profits made by PBMs in drug transactions by mandating disclosure of these fees to protect employers and patients' interests.
- Market Reaction: Following the announcement of a mere 0.09% increase in Medicare payments, the market reacted sharply, with Humana's stock dropping over 13% and UnitedHealth nearly 9%, reflecting investor concerns about the industry's outlook amidst rising costs.
- Long-term Profit Pressure: For companies like CVS, UnitedHealth, and Cigna, PBM services are a significant revenue driver; the new regulation may compress their profit margins, leading to prolonged earnings pressure for these healthcare giants.
See More
ELEVANCE HEALTH: UBS Lowers Price Target to $400 from $425
- Price Adjustment: The target price for Elevance Health's stock has been reduced from $425 to $400.
- Market Impact: This adjustment reflects changes in market conditions and expectations for the company's performance.
See More
Trump Administration's Medicare Proposal Shocks Healthcare Stocks
- Payment Increase Proposal: The Centers for Medicare and Medicaid Services proposed a mere 0.09% net increase in Medicare Advantage payments for 2027, significantly below the anticipated 4% to 6%, resulting in a $90 billion market value loss for the healthcare sector, highlighting the substantial impact of policy uncertainty on market dynamics.
- Earnings Risk Heightened: Analysts warn that if the proposed rates are finalized without adjustments, insurers could see a 15% to 20% decrease in earnings due to the disconnect between rising medical costs and flat funding, exacerbating profitability pressures within the industry.
- Bleak Industry Outlook: Although final rates are expected in April and historical trends suggest potential improvements, analysts predict the healthcare sector may enter a stagnation period of one to two years where earnings fail to expand as previously hoped, negatively affecting investor sentiment.
- Operational Improvements Overlooked: Despite UnitedHealth reporting quarterly improvements in profitability, the headline risk from the payment proposal continues to overshadow operational gains, with analysts noting that while progress is being made, significant recovery challenges remain.
See More
Baupost Group's Investment Moves in Q4
- New Investment Position: Baupost Group established a new stake in Amazon during Q4, making it the fund's second-largest holding at 9.3% of assets, reflecting confidence in the e-commerce and cloud giant despite differing views from Buffett.
- Portfolio Adjustments: The fund completely exited its position in PagSeguro Digital in Q4, indicating a strategic portfolio adjustment likely based on market performance and future expectations.
- Top Holdings: As of December 31, Restaurant Brands International remains Baupost's largest holding, indicating sustained confidence in the restaurant sector, and it was also the top holding in Q3, showcasing stability.
- Market Performance Comparison: Amazon was the worst-performing stock among the Magnificent Seven in 2025, and Baupost's investment decision may be based on optimism regarding its cloud segment growth, which will test the effectiveness of Klarman's strategy against Buffett's reduction in exposure.
See More
Humana Earnings Outlook: Anticipating Updates on Medicare Advantage
- Earnings Report: Humana is set to report its fourth-quarter earnings on Wednesday.
- Industry Challenges: The insurer and its competitors are facing challenges due to proposed Medicare Advantage payment rates, which previously led to a market selloff.
See More
House Judiciary Subpoenas Health Insurers Over ACA Fraud Allegations
- Subpoena Issued: The House Judiciary Committee has subpoenaed eight health insurers, including CVS Health and Centene, requiring them to provide information related to subsidized ACA enrollees, indicating a strong focus on potential market fraud.
- Response Deadline: These insurers must respond to the subpoenas by February 23, reflecting the committee's strict demands for transparency and compliance, which could impact the operational strategies of these companies.
- Background of Prior Investigation: The subpoenas follow insufficient responses to a December request, highlighting ongoing regulatory scrutiny over potential fraud, which may lead to stricter oversight and compliance measures within the industry.
- Impact of Premium Increases: Millions of ACA enrollees are facing sharp premium hikes due to Congress's failure to extend COVID-era tax credits, potentially resulting in customer attrition and market share decline, prompting insurers to reassess their pricing strategies in response to market changes.
See More
U.S. Labor Department Pushes for Drug Pricing Transparency
- New Drug Transparency Regulation: The U.S. Department of Labor has proposed a regulation requiring Pharmacy Benefit Managers (PBMs) to fully disclose their compensation to self-insured health plans, impacting approximately 90 million Americans, aimed at eliminating hidden fees and enhancing transparency in the healthcare system.
- Targeting Hidden Fees: The regulation specifically addresses PBMs' practices such as spread pricing, rebates, and clawbacks, aiming to reduce improper profits made by PBMs in drug transactions by mandating disclosure of these fees to protect employers and patients' interests.
- Market Reaction: Following the announcement of a mere 0.09% increase in Medicare payments, the market reacted sharply, with Humana's stock dropping over 13% and UnitedHealth nearly 9%, reflecting investor concerns about the industry's outlook amidst rising costs.
- Long-term Profit Pressure: For companies like CVS, UnitedHealth, and Cigna, PBM services are a significant revenue driver; the new regulation may compress their profit margins, leading to prolonged earnings pressure for these healthcare giants.
See More
ELEVANCE HEALTH: UBS Lowers Price Target to $400 from $425
- Price Adjustment: The target price for Elevance Health's stock has been reduced from $425 to $400.
- Market Impact: This adjustment reflects changes in market conditions and expectations for the company's performance.
See More
Trump Administration's Medicare Proposal Shocks Healthcare Stocks
- Payment Increase Proposal: The Centers for Medicare and Medicaid Services proposed a mere 0.09% net increase in Medicare Advantage payments for 2027, significantly below the anticipated 4% to 6%, resulting in a $90 billion market value loss for the healthcare sector, highlighting the substantial impact of policy uncertainty on market dynamics.
- Earnings Risk Heightened: Analysts warn that if the proposed rates are finalized without adjustments, insurers could see a 15% to 20% decrease in earnings due to the disconnect between rising medical costs and flat funding, exacerbating profitability pressures within the industry.
- Bleak Industry Outlook: Although final rates are expected in April and historical trends suggest potential improvements, analysts predict the healthcare sector may enter a stagnation period of one to two years where earnings fail to expand as previously hoped, negatively affecting investor sentiment.
- Operational Improvements Overlooked: Despite UnitedHealth reporting quarterly improvements in profitability, the headline risk from the payment proposal continues to overshadow operational gains, with analysts noting that while progress is being made, significant recovery challenges remain.
See More
