Elevance Health Stands Firm Amid Industry Headwinds: Can Profit Guidance Hold?

Elevance Health (formerly UnitedHealthcare) has defied the recent storm in the health insurance sector, maintaining its 2025 profit guidance despite UnitedHealth Group’s (UNH) abrupt earnings miss and steep downward revision to its own outlook. While UNH’s struggles sent shockwaves through the industry—triggering a 23% one-day drop in its shares—Elevance’s stock initially fell 10% but stabilized, underscoring its resilience. The question now is: Can Elevance deliver on its promises, or is its confidence misplaced in a sector grappling with rising medical costs and regulatory pressures?

The UnitedHealth Effect
UnitedHealth’s Q1 earnings revealed soaring Medicare Advantage costs, with medical expense ratios climbing to 89.3%—far above its 2024 target of 87.5–88.5%. The company cited “operational execution issues” and reduced its 2025 EPS guidance to $26–$26.50 from a prior range of $29.50–$30. This sent investors fleeing, not just from UNH but from the entire sector. Elevance, however, doubled down.

Elevance’s Defense: Data and Discipline
Elevance reaffirmed its 2025 adjusted EPS guidance of $34.15–$34.85, with Q1 results exceeding expectations. Adjusted EPS hit $11.97 versus estimates of $11.38, even as Medicare Advantage membership dipped slightly to 2.3 million due to broker commission cuts and lost contracts. The company emphasized that medical cost trends, while elevated, remained within its pricing model.

Key to Elevance’s stance is its ability to manage Medicare Advantage costs. The segment’s medical cost ratio in Q1 was 88.5%, up from 87.8% in 2024 but still within its 88–89% target range for 2025. CEO Mark Bertolini highlighted “price discipline” and “member retention strategies” as tools to offset pressures. Elevance also noted that 85% of its Medicare Advantage members are in plans with 2025 premiums already locked in, reducing near-term volatility.

The Membership Puzzle
Despite losing 35,000 Medicare Advantage members during annual enrollment—a 1.5% drop—Elevance remains confident in its membership growth. The decline stemmed partly from reduced broker commissions, a move to cut costs, and the loss of a Special Needs Plan contract. However, its total membership (including government programs like Medicaid) fell 2.3% to 45.7 million in 2024, signaling broader challenges in attracting or retaining customers.

Investor Sentiment and Risks
While Elevance’s stock recovered from its post-UNH plunge, investor sentiment remains wary. On Stocktwits, the stock’s mood turned “extremely bearish,” with retail traders citing fear of a Medicare Advantage “cost contagion” across the sector. Year-to-date, Elevance’s shares are up 16%, but they’ve fallen 16% over the past year—a trend that could reverse if peers stabilize.

The bigger risk lies in whether Elevance’s cost controls hold. Medicare Advantage margins are under siege: CMS reduced 2025 reimbursement rates by 7%, and rising hospital costs continue to strain insurers. If medical costs exceed Elevance’s 88–89% target, its EPS guidance could come under pressure.

Conclusion: A Test of Resilience
Elevance’s decision to stand by its guidance is a gamble, but it’s not without merit. The company’s Q1 beat, disciplined pricing, and locked-in premiums provide a buffer. Its Medicare Advantage membership trajectory, while not flawless, remains on track, and its 2024 net income of $6 billion—flat but stable—suggests operational consistency.

However, the sector’s reliance on government reimbursements and its sensitivity to medical inflation means Elevance’s fate is tied to factors beyond its control. Investors should watch two key metrics:
1. Medical cost ratios in Q2 and Q3, which will test if Elevance’s projections hold.
2. Membership retention in the second half of 2025, as the CMS reimbursement cuts take full effect.

If Elevance can navigate these hurdles, its stock could regain momentum. But with UnitedHealth’s caution ringing loud, even a minor slip could reignite the sell-off. For now, the company’s bet on its own playbook remains its best hope—but the market will demand proof.