Elevance Health, Inc. (NYSE: ELV) is a leading health benefits company operating in the United States through its subsidiaries. The company manages Blue Cross and Blue Shield plans in 14 states and holds licenses to sell health insurance nationwide. Elevance offers a diverse portfolio of health plans, including employer-sponsored and individual plans, Medicare Advantage, Medicare supplements, and Medicaid.

Financials

In the fiscal year 2023, Elevance Health reported impressive financial results, with annual revenue reaching $171,340,000,000 and net income of $5,987,000,000. The company's strong performance was driven by growth across its business segments, as well as effective cost management and strategic initiatives. Elevance's annual operating cash flow stood at $8,061,000,000, while its free cash flow reached $6,765,000,000, showcasing the company's robust liquidity and financial flexibility.

During the second quarter of 2024, Elevance Health continued to demonstrate its resilience and adaptability in a dynamic operating environment. The company reported adjusted diluted earnings per share of $10.12, reflecting a 12% year-over-year growth. This performance was underpinned by the strength and diversification of Elevance's business model, as well as the company's disciplined execution of its strategic priorities.

Business Overview

The Health Benefits segment, which accounts for the majority of Elevance's revenue, exhibited balance and resilience in the quarter. In the Commercial business, the company continued to make progress on its margin recovery initiative and delivered solid membership growth, particularly in the individual ACA market, where enrollment has grown substantially year-over-year. Elevance also extended its momentum in national accounts, where the business is tracking to historically high retention levels and new customer acquisition remains strong.

In the Medicaid business, Elevance has shown success with recent new business wins and re-procurement, positioning the company for future growth. The company launched the Indiana Pathways for Aging program, serving nearly 40% of all eligible Hoosiers, and was awarded the KanCare Kansas Medicaid RFP, working in partnership with two Blue partners as Healthy Blue.

Regarding Medicaid redeterminations, Elevance acknowledged the challenges posed by the process, with approximately 70% of coverage losses attributable to administrative hurdles. The company continues its proactive outreach to members to maximize access to care and minimize barriers to whole health. While Elevance expects disenrolled members to re-enroll throughout the year, the pace has been slower than initially anticipated.

In the Medicare Advantage business, Elevance benefited from a recent ruling regarding its challenge of the initial 2024 Star ratings. As a result, the company's enterprise weighted-average rating has increased to 4.0 Stars, and Elevance now expects approximately 56% of its members to be in plans rated at least 4.0 Stars or in contracts too new to be rated that will be reimbursed similarly in payment year 2025. This outcome will help offset funding cuts to the Medicare Advantage program for the second consecutive year.

Elevance's Health Services businesses, comprising CarelonRx and Carelon Services, have also been key drivers of the company's growth. Carelon Services delivered robust growth in operating revenue and earnings in the quarter, gaining traction with external clients through new business wins and the expansion of risk-based services to existing customers.

CarelonRx, Elevance's pharmacy services business, is integrating recent acquisitions and scaling key value drivers as the company invests to control the levers that matter to deliver greater value and enhance consumer experiences for its members. While the margin performance in the second quarter reflects elevated investment, Elevance remains committed to providing best-in-class home delivery and specialty pharmacy services and sees significant growth potential for CarelonRx.

Outlook

Looking ahead, Elevance has reaffirmed its full-year adjusted diluted earnings per share guidance of at least $37.20, which represents 12% growth year-over-year. The company expects to accelerate revenue growth across all of its businesses in 2025, driven by continued momentum in Commercial, a return to growth in Medicaid, and sustainable growth and margins in Medicare Advantage.

Elevance's enterprise growth algorithm, which underpins its adjusted diluted earnings per share target of average annual growth of at least 12% over time, incorporates upper single-digit growth in operating revenue, underpinned by membership growth, geographic expansion, and momentum in Carelon. The company's commitment to disciplined underwriting and operating expense management across all lines of business is expected to drive the improvement inherent in its enterprise operating margin target of 6.5% to 7% by 2027.

Conclusion

The company's diversified business model, strategic investments, and focus on operational efficiency position Elevance Health as a healthcare industry leader poised for sustainable growth. With a strong financial foundation, a robust pipeline of growth opportunities, and a steadfast commitment to serving its members, Elevance Health is well-equipped to navigate the evolving healthcare landscape and deliver long-term value for its shareholders.