Trump Administration's Medicare Rate Hike Proposal Triggers Market Turmoil
Written by Emily J. Thompson, Senior Investment Analyst
Source: Benzinga
- Medicare Rate Proposal: The Trump administration's proposed 0.09% rate hike for Medicare Advantage plans in 2027, significantly below Wall Street's 4%-6% expectations, triggered a sharp selloff in healthcare stocks, highlighting the substantial impact of policy on insurers' valuations.
- Severe Market Reaction: Stocks of managed-care giants like CVS Health, Humana, Elevance Health, and UnitedHealth plummeted on Monday and remained in the red during pre-market trading on Tuesday, reflecting investors' heightened sensitivity to policy risks.
- Hedge Fund Investment Strategy: Billionaire hedge fund manager Seth Klarman's Baupost Group now has over 16% of its U.S. equity portfolio in insurance-related stocks, with Elevance Health approaching a 9% position, indicating strong conviction in the sector despite recent volatility.
- Policy Risk vs Margin of Safety: The Medicare Advantage rate shock underscores the fragility of insurer margins to political decisions, with Klarman betting that the market is overreacting and that large players like Elevance will maintain long-term pricing power and cost control despite regulatory uncertainties.
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Analyst Views on ELV
Wall Street analysts forecast ELV stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for ELV is 392.07 USD with a low forecast of 320.00 USD and a high forecast of 431.00 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
15 Analyst Rating
11 Buy
4 Hold
0 Sell
Moderate Buy
Current: 341.850
Low
320.00
Averages
392.07
High
431.00
Current: 341.850
Low
320.00
Averages
392.07
High
431.00
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.
Elevance Health Sets 2026 EPS Guidance Amid Membership Declines
- 2026 EPS Guidance: Elevance Health has set a target for adjusted diluted earnings per share of at least $25.50 for 2026, despite 2025 results including approximately $3.75 per share from favorable nonrecurring items, indicating a cautious approach amidst challenges.
- Medicaid Business Outlook: CEO Gail Boudreaux highlighted that the Medicaid segment is expected to experience an operating margin of approximately negative 1.75% in 2026, reflecting a focus on long-term sustainability with ongoing rate adjustments and program design changes.
- Medicare Membership Decline: The company anticipates a decline in Medicare Advantage membership in the high teens percentage range for 2026, a strategic move aimed at improving margins, although this may exert short-term pressure on revenues.
- Financial Performance Review: Elevance reported adjusted diluted EPS of $3.33 for Q4 and operating revenue of $49.3 billion for the full year, marking a 10% year-over-year increase, demonstrating robust financial performance under challenging market conditions.
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ELEVANCE HEALTH STOCK RECOVERS FROM PREMARKET DECLINE, RISING 3.23% FOLLOWING Q4 RESULTS REPORT
- Market Performance: Elevance Health shares experienced a decline of 3.23% following the release of their Q4 results.
- Core Reports Impact: The drop in stock value is attributed to the core reports that were released, which likely influenced investor sentiment.
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