Medicare Advantage costs ‘manageable’ for Elevance Health: 8 notes

Medicare Advantage costs are “elevated, but manageable,” according to Elevance Health CFO Mark Kaye. 

The company reported its first quarter earnings April 22. Total revenue in the first quarter was $40.9 billion, up 14.6% from the first quarter of 2024. Net income was nearly $2.2 billion. 

Earlier in April, Elevance sought to reassure investors after rival UnitedHealth Group reported first-quarter earnings below expectations and cut its earnings guidance for 2025. Rising Medicare Advantage costs were a driving factor in what UnitedHealth Group CEO Andrew Witty called the “unusual and unacceptable” performance. 

After UnitedHealth’s earnings miss, Elevance told its investors Medicare Advantage costs were in line with its expectations. 

Here are eight things to note: 

1. MA costs are trending as expected, Mr. Kaye told investors on an April 22 call. Flu and other respiratory viruses drove increased costs in the first quarter, he said, but this should resolve in the second quarter of the year.
   
   
2. Elevance’s insurance division reported a total operating revenue of $41.4 billion in the first quarter, up 11.2% year over year. The division’s operating margin was 5.4%.
   
   
3. Total medical membership at Elevance is 45.8 million. There are nearly 8.9 million Medicaid members and 2.3 million Medicare Advantage members.
   
   
4. The company’s benefit expense ratio was 86.4% in the first quarter.
   
   
5. The company reaffirmed its 2025 adjusted earnings per share to be in the range of $34.15 to $34.85.
   
   
6. Since early 2024, insurers have said Medicare Advantage expenses are on the rise. Pent-up demand for care after the COVID-19 pandemic is one cause. Insurers have also said rate increases from CMS are inadequate to cover the rising cost of care.
   
   
7. CEO Gail Boudreaux told investors that Elevance Health was well prepared for a year of elevated cost trend.
   
   “We feel that we’ve accounted for that, and feel, quite frankly, that we’re going to continue to monitor the situation but feel comfortable with the range and direction of our guidance,” Ms. Boudreaux said.
   
   
8. Earlier in April, CMS announced a 5.06% rate increase for Medicare Advantage plans in 2026, a larger increase than plans have received in previous years.
   
   Mr. Kaye told investors the increase is “more reflective of actual trends, but doesn’t fully restore the impact of prior underfunding.”