States jacked up their Medicaid rates in July, a positive development for the insurer. Elevance now thinks its Medicaid margin will be slightly better than -1.75% this year.

Elevance posted net income of $1.4 billion in the third quarter, up almost 15% year over year, despite revenue of $51.4 billion remaining essentially flat.

The positive results were expected after upbeat commentary from executives during the Indianapolis-based insurer’s investor day last month. It was a “solid” quarter, TD Cowen analyst Ryan Langston commented in a Wednesday note.

Elevance is mostly known for its Blues-licensed plans but also operates in a variety of government programs, including Medicaid. The insurer covers 8.2 million beneficiaries of the safety-net insurance program in more than a dozen states.

But Medicaid has posed a challenge since 2024, as its population became sicker and necessitated higher spending on their care. State rate updates have trailed rising acuity, tamping down on profits for managed care organizations.

The mismatch spurred Elevance to exit Washington, D.C.’s Medicaid market this summer, and share plans to leave additional Medicaid markets through the end of 2027.

But stronger-than-expected July 1 rate updates from some states are boosting Elevance’s Medicaid performance, executives said on the earnings call.

Elevance still continues to expect 2026 to be a trough year for Medicaid margins, before they bounce back in 2027. The insurer is still focused on curtailing costs, including by restricting behavioral healthcare like applied behavioral analysis therapy for individuals with autism, which has been a major driver of spending.

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