Elevance Health’s Medicaid business is expected to reach a low point on profits in 2026, according to the company’s CFO, Mark Kaye.
While speaking at the UBS Global Healthcare Conference on Nov. 11, Mr Kaye said the company anticipates its Medicaid operating margin to decrease to -1.75% in 2026, following a -0.5% margin in 2025.
While Elevance is forecasting a challenging 2026, the expectation is that Medicaid will return to more sustainable margins in 2027, with the company’s target for margins between 2% and 4% over the long term.
“Our 2026 outlook is intentionally prudent,” Mr. Kaye said. “It’s meant to establish a credible foundation for improvement in 2027 and beyond.”
Elevance and other insurers have been challenged with the “mismatch” between the cost of care for Medicaid beneficiaries and rates from states for around two years, and several factors are contributing to the ongoing pressures on margins. Elevance said the company continues to face an increase in acuity among its Medicaid members. As states conduct eligibility redeterminations, lower-acuity members are disenrolling at higher rates, leaving behind a population with more complex healthcare needs.
Mr. Kaye said that recent disenrollments “have primarily affected lower-acuity members,” which has driven the remaining membership’s risk profile higher. The company is also grappling with rising utilization in several areas, particularly behavioral health and specialty drugs.
“State rate setting processes typically rely on experience periods that lag current trends by up to 12 to 24 months…that lag has led to a material timing mismatch between rates and the actual cost of care” Mr. Kaye added. “We recognize that the provisions included in the budget reconciliation bill will present a headwind, and we expect the impact to phase in over time as implementation timelines vary across states.”
To mitigate the pressures, Elevance has intensified efforts to tighten medical care management, ink more value-based arrangements, and scale digital and AI tools. Additionally, the company is working with states to align Medicaid reimbursement rates with the rising acuity and costs in the program.
