Elevance Health said Thursday it expects cost pressures on its Medicaid business to ease by midyear.
That could spell good news for other Medicaid players as well.
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Medicaid managed care organizations, including Elevance Health, Centene and UnitedHealth Group, have been working with states to secure higher rates to make up for the toll the Medicaid redeterminations process has taken on their businesses.
During the COVID-19 public health emergency, states paused Medicaid eligibility redeterminations in exchange for enhanced federal funding. Once that expired, states began clearing ineligible people from Medicaid rolls in April 2023. Insurers have since been sounding the alarm, saying remaining Medicaid members are sicker and costlier to cover.
Elevance Health argues state rates fail to account for the higher level of utilization across its Medicaid business, but the company expects that to shake out throughout the year, Chief Financial Officer Mark Kaye said Thursday during the company's fourth-quarter earnings call.
“We are encouraged by the rate adjustments from our state partners, which are helping to better align premiums with current care costs,” Kaye said. “As these adjustments become more fully reflected, we expect Medicaid margins to improve over the course of 2025.”
Elevance Health continues to report higher utilization among its Medicaid members, many whom are seeking behavioral health and inpatient services, he said.
Costs are on the rise as evident by the share of premiums Elevance Health spent on medical care ticking up throughout 2024. The company reported a fourth-quarter medical loss ratio of 92.4%, up from 89.2% a year earlier. The insurer’s full-year medical loss ratio hit 88.5%, up from 87% in 2023.
Year-over-year, fourth-quarter net income plummeted 51.2%, to $413 million, as revenues rose 6.6%. Annual net income slipped 0.3% to nearly $6 billion as revenues increased 3.3% to $177 billion.
The company entered 2025 with 45.7 million members, down 2.3% from 2024. Growth in its exchange and employer fee-based plans was not enough to offset attrition from Medicaid redeterminations and changes to its geographic footprint.
Elevance Health, however, is planning for enrollment growth this year. The company expects to have 45.8 million to 46.6 million members by year’s end and is targeting more members in its commercial fee-based, exchange and Medicare Advantage businesses, Kaye said.
Cost trends in its Medicare business were also elevated, particularly for post-acute care, but remained in line with expectations, he said. Elevance Health expects its Medicare Advantage membership to grow 7%-9% throughout the year.
Executives reported strong retention, growth in the company's group plans and interest in its HMO products during the Medicare Advantage annual enrollment period, which ended last month. The Centers for Medicare and Medicaid Services is expected to release Medicare Advantage annual enrollment data this week.