Elevance Health, Inc. ( ELV ) shares fell Tuesday despite beating estimates, as Medicare cost pressures, Obamacare plan dynamics, and Medicaid attrition weighed on sentiment.

The company reported third-quarter adjusted earnings per share of $6.03, beating the analyst consensus estimate of $4.93.

Quarterly sales of $50.087 billion, an increase of 12% year-over-year, beat the Street view of $49.369 billion.

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The revenue increase was driven by higher premium yields in our Health Benefits segment, recently closed acquisitions, and growth in Medicare Advantage membership.

Medicaid Membership Losses

However, Elevance Health ( ELV ) said revenue growth was partially offset by ongoing Medicaid membership losses due to eligibility reverifications.

Medical membership totaled approximately 45.4 million as of September 30, driven by lower year-over-year BlueCard and Medicaid membership.

“In a dynamic healthcare environment, we’re focused on advancing affordability and elevating the member experience through our growing value-based care partnerships and AI-enabled digital solutions that simplify access and improve outcomes,” said CEO Gail K. Boudreaux.

Cost Management and Operational Performance

The benefit expense ratio was 91.3%, an increase of 180 basis points year-over-year, reflecting elevated, but expected, cost trend primarily in the Medicare business. 

The operating expense ratio was 10.5%, an improvement of 130 basis points.

The adjusted operating expense ratio was 10.4%, an increase of 100 basis points, primarily driven by targeted investments to scale Carelon’s capabilities, support and strengthen workforce, and accelerate technology adoption while maintaining expense discipline. Operating cash flow was $4.2 billion year-to-date.

Health Benefits segment operating revenue was $42.2 billion in the third quarter, an increase of 10% year-over-year, driven primarily by higher premium yields.

Operating revenue for Carelon was $18.3 billion in the third quarter, an increase of 33%.

Management Commentary on Healthcare Dynamics

In its quarterly conference call, Elevance Health ( ELV ) warned that the lapse of enhanced subsidies would meaningfully reduce membership in 2026.

Executives said they are expanding behavioral health programs and tightening specialty drug management to contain rising costs.

They also expect higher fourth-quarter costs in Obamacare plans as members use benefits ahead of 2026 changes.

Medicaid margins should hit a low point in 2026, with improvement anticipated in 2027.

Buybacks and Dividends

During the third quarter of 2025, the company repurchased 2.9 million shares of its common stock for $875 million, at a weighted average price of $303.48, and paid a quarterly dividend of $1.71 per share, representing a cash distribution totaling $381 million.

As of September 30, 2025, the company had approximately $7.2 billion of board-approved share repurchase authorization remaining.

Outlook

“As we plan for 2026, we remain disciplined in managing what we can control – positioning our businesses for long-term, sustainable growth and value creation for all stakeholders,” the CEO said.

Elevance reaffirmed its 2025 adjusted EPS outlook at $30.00, which is in line with prior guidance (Street view: $29.90).

The company also raised its 2025 GAAP EPS forecast to $24.70, up from $24.10 (Street view: $25.24).

Price Action: ELV shares were trading lower by 1.84% to $347.56 at last check Tuesday.

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