Elevance Health’s $285.46 Plunge: A Perfect Storm of Medicaid Woes and Market Realignment?

Summary
• Elevance Health (ELV) slumps 5.6% to $285.46, breaching its 52-week low of $279.51
• Q2 earnings miss and revised 2025 guidance trigger sector-wide jitters
• UnitedHealth (UNH), sector leader, dips 0.93% as managed healthcare faces headwinds

Elevance Health’s dramatic 12% intraday drop has sent shockwaves through the managed healthcare sector, with the stock trading at $285.46—its lowest since 2023. The selloff follows a disastrous Q2 report revealing elevated ACA and Medicaid costs, membership attrition, and a revised $30 adjusted EPS outlook. As peers like UnitedHealth also falter, investors are scrambling to assess whether this is a buying opportunity or a deeper structural shift in health insurance valuations.

Medicaid Headwinds and Earnings Guidance Cut Trigger ELV’s Sharp Decline
Elevance Health’s Q2 earnings report exposed a perfect storm of challenges: a 260-basis-point rise in benefit expense ratios due to ACA and Medicaid cost overruns, coupled with a 212,000-member decline in its Medicaid business. The company’s revised 2025 adjusted EPS guidance of $30—down from $34.85—reflected slower Medicaid rate alignment and elevated medical trends. This guidance shock, compounded by Centene’s recent withdrawal of its 2025 forecasts, signaled a broader industry reckoning with risk mispricing in government programs, triggering a flight to safety among investors.

Managed Healthcare Sector Falters as Medicaid Woes Spread
The managed healthcare sector mirrored ELV’s decline, with UnitedHealth (UNH) down 0.93% despite stronger-than-expected Q2 revenues. While UNH’s 14% revenue growth cushioned its fall, the sector’s shared exposure to Medicaid cost inflation and ACA underperformance amplified the selloff. Elevance’s 12% drop far outpaced UNH’s modest decline, highlighting its heightened sensitivity to Medicaid underperformance and regulatory uncertainty.

Options and Technical Plays: Capitalizing on ELV’s Volatility
• RSI: 24.3 (oversold)
• MACD: -15.13 (bearish), Signal: -11.36, Histogram: -3.78
• Bollinger Bands: Upper $403.03, Middle $358.16, Lower $313.28
• 200D MA: $404.98 (well above current price)
• Support/Resistance: 30D $375.23–377.10, 200D $399.91–404.34

ELV’s technicals paint a bearish short-term picture, with the stock trading below all major moving averages and RSI in oversold territory. Key levels to watch: the 52-week low at $279.51 and the 200D MA at $404.98 as a potential long-term anchor. While the bearish momentum is clear, the oversold RSI suggests a possible bounce from the $279–285 range. For options traders, the August 15 expiration offers two compelling puts: ELV20250815P280 and ELV20250815P290.

• ELV20250815P280: Delta -0.41, IV 36.42%, Leverage 31.03%, Turnover $133,871
• ELV20250815P290: Delta -0.54, IV 36.29%, Leverage 19.90%, Turnover $105,263

Under a 5% downside scenario (ST = $271.19), ELV20250815P280 yields a $9.81 profit (max(0, 280 - 271.19)), while ELV20250815P290 nets $18.81 (max(0, 290 - 271.19)). Both options offer high gamma (0.0133 and 0.0136) and theta (-0.0907 and -0.0558), ideal for a short-term bearish play. Aggressive short-sellers should prioritize ELV20250815P290 for its higher delta and leverage, while ELV20250815P280 suits a more measured bet.

Backtest Elevance Health Stock Performance
The backtest of ELV's performance after an intraday plunge of -6% shows mixed results. While the 3-day win rate is 52.48%, indicating a slight majority of positive returns in the short term, the 10-day win rate is lower at 54.87% and the 30-day win rate is 49.74%. This suggests that while ELV may bounce back from a sharp drop, longer-term returns are more variable. The maximum return during the backtest period was 0.18%, which occurred on day 29, indicating that even though ELV recovers from a significant drop, its subsequent returns are generally modest.

Position for Volatility: ELV’s Intraday Reversal Could Signal Sector Rotation
Elevance Health’s 12% drop reflects both near-term Medicaid struggles and a broader sector recalibration. While the 52-week low at $279.51 looms as a critical support, the oversold RSI and elevated gamma in key puts suggest a potential rebound. Investors should monitor the 200D MA at $404.98 as a long-term benchmark and watch for sector leader UnitedHealth’s (-0.93%) trajectory. For now, ELV20250815P290 offers the best short-term bearish exposure. If $279.51 breaks, consider adding ELV20250815P280 to capitalize on deeper downside. Position sizing should reflect the stock’s heightened volatility and sector-wide risks.