Elevance Health, Inc.

Elevance Health is one of the largest health insurers in the United States in terms of medical membership, serving approximately 45.2 million ¹ medical members through its affiliated health plans as of December 31, 2025. The company operates in the managed care industry, which is highly competitive both nationally and in local markets, with competition driven by aggressive marketing, pricing, bid activity for government-sponsored programs, business consolidations, new strategic alliances, new market entrants, technological advancements, and legislative reform. Elevance Health is an independent licensee of the Blue Cross and Blue Shield Association (BCBSA), an association of 33 ² independent primary licensees including Elevance Health as of December 31, 2025, and serves members as the Blue Cross licensee for California and as the Blue Cross and Blue Shield licensee for 14 ³ other states and territories. The company is licensed to conduct insurance operations in all 50 ⁴ states, the District of Columbia and Puerto Rico through its subsidiaries.

The managed care industry is highly competitive, and Elevance Health believes its exclusive right to market products under the BCBS brand in its most significant markets provides greater brand recognition over competitive product offerings. Typically, the company is the largest participant in each of its BCBS branded markets. Primary competitors include other health benefits companies, and the pharmacy services industry is highly competitive, with CarelonRx subject to competition from national, regional and local pharmacy service providers, insurers, health plans, large retail pharmacy chains, large retail stores, supermarkets, mail order pharmacies, web pharmacies and specialty pharmacies. The company's competitive advantages include its BCBS brand strength, national scale, local market focus, provider networks, and value-based payment models that align incentives to deliver the right care at the right time in the right setting.

Elevance Health generates revenue through three primary streams: risk-based premiums, administrative fees from self-funded employers, and pharmacy and health service fees through its Carelon businesses. The company offers a broad spectrum of network-based managed care risk-based plans to Individual, Employer Group, Medicaid and Medicare markets, and provides a broad array of managed care services to fee-based customers including claims processing, stop loss insurance, care provider network access, medical management, care management, wellness programs, actuarial services and other administrative services. The company's revenue mix includes premiums from risk-based contracts where it indemnifies policyholders against costs for covered health benefits, product revenue from CarelonRx for unaffiliated pharmacy customers, and service fees from fee-based customers for transaction processing or network discount savings. Through its participation in various federal government programs, the company generated approximately 32% ⁵ of its total consolidated revenues from agencies of the U.S. government for the year ended December 31, 2025.

The Health Benefits segment offers a comprehensive suite of health plans and services to Individual, Employer Group risk-based, Employer Group fee-based, BlueCard, Medicare, Medicaid and FEP members, including health products on a full-risk basis, administrative managed care services, and specialty products such as stop loss insurance, dental, vision and supplemental health insurance benefits. For the year ended December 31, 2025, Health Benefits operating revenue was $167,094 ⁶ million, with Commercial operating revenue of $50,401 ⁷ million, Medicare operating revenue of $44,752 ⁸ million, Medicaid operating revenue of $56,620 ⁹ million, and Federal Employee Program operating revenue of $15,321 ¹⁰ million. The segment's operating gain was $4,158 ¹¹ million with an operating margin of 2.5% ¹². Key drivers impacting results include membership levels and health status of members, premium pricing, medical cost trend, network performance, risk adjustment accuracy, quality ratings, and operating efficiency.

The CarelonRx segment includes the company's pharmacy services business, marketing and offering pharmacy services to affiliated health plan customers and external customers outside of the health plans owned by Elevance Health. CarelonRx offers a comprehensive portfolio of pharmacy services including home delivery and specialty pharmacies, claims adjudication, formulary management, pharmacy networks, rebate administration, a prescription drug database and member services, as well as infusion services and injectable therapies through owned ambulatory infusion centers added in March 2024 through the acquisition of Paragon Healthcare, Inc. For the year ended December 31, 2025, CarelonRx operating revenue was $43,400 ¹³ million and operating gain was $2,418 ¹⁴ million with an operating margin of 5.6% ¹⁵. The Carelon Services segment integrates physical, behavioral, pharmacy, and social-care capabilities to support whole-health services through Carelon Health and Carelon Insights businesses, with operating revenue of $28,316 ¹⁶ million and operating gain of $960 ¹⁷ million with an operating margin of 3.4% ¹⁸ for the year ended December 31, 2025.

During the year ended December 31, 2025, total medical membership decreased by 0.5 million ¹⁹, or 1.1% ²⁰, driven primarily by attrition in Medicaid membership as a result of eligibility redeterminations and decreases in BlueCard, Employer Group risk-based and FEP businesses, partially offset by increases in Medicare Advantage and Individual businesses. The company repurchased 7,434,937 ²¹ shares at an aggregate cost of $2,605 ²² million under its common stock repurchase program during the year ended December 31, 2025. On December 31, 2024, the company completed its acquisition of Centers Plan for Healthy Living LLC, and on December 10, 2024, completed its acquisition of RSV QOZB LTSS, Inc. (d/b/a CareBridge). The company recognized its payment obligation under the Provider Settlement Agreement of $666 ²³ million in September 2024, and the ultimate amount paid by the company under the Subscriber Settlement Agreement was $604 ²⁴ million, primarily accrued in 2020.

Total operating revenue for the year ended December 31, 2025 was $197,584 ²⁵ million, an increase of $22,380 ²⁶ million, or 12.8% ²⁷, from the year ended December 31, 2024, driven primarily by premium rate increases in the Health Benefits segment in recognition of medical cost trends, recent acquisitions, and growth in the Medicare Advantage business, partially offset by Medicaid membership attrition. Shareholders' net income for the year ended December 31, 2025 was $5,662 ²⁸ million, a decrease of $318 ²⁹ million, or 5.3% ³⁰, from the year ended December 31, 2024, primarily due to decreased operating gain within the Health Benefits segment, partially offset by decreased income tax expense, increases in operating gain in CarelonRx and Carelon Services businesses, and an increase in net investment income. Diluted shareholders' earnings per share for the year ended December 31, 2025 was $25.21 ³¹, a decrease of $0.47 ³², or 1.8% ³³, from the year ended December 31, 2024. Operating cash flow for the year ended December 31, 2025 was $4,290 ³⁴ million, or approximately 0.8 ³⁵ times net income.

A key growth vector is the expansion of the company's Individual ACA business through the Public Exchange. In 2025, the company expanded its operations into select service areas in Florida, Maryland, and Texas through its Simply Healthcare and Wellpoint brands. The company expects the Public Exchange to be influenced by policy and regulatory changes, particularly around federal subsidies, compliance requirements and market stability. From 2021 to 2025, Individual market enrollment grew significantly, driven in part by enhanced Premium Tax Credits (PTCs), which reduced Public Exchange coverage premiums for individuals who qualified. The enhanced PTCs expired on December 31, 2025, and as a result, the amount of Public Exchange coverage premiums may increase for those individuals previously receiving the enhanced PTCs, which may negatively impact individual market enrollment.

Another growth vector is the Medicare Advantage business, which saw membership growth of 164,000 ³⁶, or 7.9% ³⁷, during the year ended December 31, 2025. The company's 2026 Star Ratings, released in October 2025 and used to determine Medicare Advantage bonus payments in 2027, reflect that approximately 59% ³⁸ of the company's Medicare Advantage members are enrolled in plans rated at least 4.0 Stars or higher, or the equivalent, compared to approximately 40% ³⁹ of members in plans with 2025 Star Ratings of at least 4.0 Stars. The company also continues to pursue growth through its Carelon businesses, with CarelonRx operating revenue increasing 20.7% ⁴⁰ and Carelon Services operating revenue increasing 57.7% ⁴¹ for the year ended December 31, 2025, driven by the acquisition of CareBridge in December 2024 and the continued expansion of risk-based capabilities in specialty care solutions and behavioral health services.

The benefit expense ratio increased to 90.0% ⁴² for the year ended December 31, 2025, compared to 88.5% ⁴³ for the year ended December 31, 2024, primarily as a result of higher medical cost trend across all lines of business within the Health Benefits segment, principally within the ACA business. The operating expense ratio decreased to 10.6% ⁴⁴ for the year ended December 31, 2025, compared to 11.4% ⁴⁵ for the year ended December 31, 2024, primarily due to operating leverage associated with growth in operating revenue and non-recurrence of the BCBSA provider settlement recorded in 2024, partially offset by increases in premium tax expenses and assessments and increases in targeted investments to support and strengthen the workforce and accelerate technology adoption. The effective income tax rate decreased from 24.5% ⁴⁶ to 15.6% ⁴⁷, due to a discrete non-operating tax benefit and favorable resolution of uncertain tax positions.

The company operates in a hybrid workforce environment and believes its properties are adequate and suitable for its business as presently conducted. The company's information systems require ongoing investment and commitment of significant resources to maintain, integrate, upgrade, enhance and expand existing systems, and development of new systems, including systems powered by or incorporating AI and machine learning. The company has business continuation and resiliency plans which are maintained, updated and tested regularly. The company's cybersecurity and risk management programs utilize policies, processes, and technologies to identify, assess, manage and mitigate cybersecurity risks and threats, aligned and measured against the National Institute of Standards and Technology (NIST) Cybersecurity Framework.

During the year ended December 31, 2025, the company repurchased 7,434,937 ⁴⁸ shares at an aggregate cost of $2,605 ⁴⁹ million under its common stock repurchase program. As of December 31, 2025, the company had remaining Board authorization of $6,695 ⁵⁰ million to repurchase its common stock. Cash dividends paid during the year ended December 31, 2025 were $1,529 ⁵¹ million. On January 27, 2026, the Audit Committee declared a quarterly cash dividend to shareholders of $1.72 ⁵² per share on the outstanding shares of common stock, payable on March 25, 2026 to shareholders of record as of March 10, 2026. Purchases of property and equipment were $1,116 ⁵³ million for the year ended December 31, 2025.

The company faces structural headwinds from medical cost trends, which are primarily driven by changes in the utilization of services across all provider types and the unit cost of these services. Medicaid cost trends remain elevated due to higher population acuity and increased utilization of services. Membership shifts from Medicaid into the Individual ACA business following the redetermination process that began in April 2023, together with lower membership effectuation rates, particularly in geographies with high concentrations of highly subsidized members, have driven a market-wide increase in morbidity, resulting in elevated medical cost trends. The enhanced PTCs expired on December 31, 2025, which may negatively impact individual market enrollment. The company also faces headwinds from regulatory changes, including the Inflation Reduction Act of 2022, which authorizes CMS to negotiate prices on a limited set of Medicare prescription drugs beginning in 2026, redesigns the Medicare Part D benefit, and requires drug manufacturers to pay rebates if prices increase beyond inflation.

The company identified several constraints to its growth plan, including that the Public Exchange markets in general are highly volatile and unpredictable from year to year, and any variation from cost expectations regarding acuity, enrollment levels, adverse selection, or other assumptions utilized in setting premium rates could have an adverse effect on results of operations. The company also noted that pricing of Medicare and Medicaid programs may not adequately reflect current underlying healthcare cost trends given the timing lag between when pricing is established and the start of the applicable contract. Additionally, the company faces risks related to the BCBSA license agreements, which contain requirements and restrictions including minimum capital and liquidity requirements, enrollment and customer service performance requirements, and a requirement that at least 80% ⁵⁴ (or, in the case of Blue Cross of California, substantially all) of a licensee's annual combined local net revenue attributable to healthcare plans and related services within its service areas must be sold, marketed, administered or underwritten under the BCBS names and marks.

The company's profitability depends on its ability to accurately predict and price for healthcare costs, and slight differences between predicted and actual medical costs or utilization rates as a percentage of premium revenues can result in significant changes in results of operations. The company faces significant regulatory risk from participation in Medicare and Medicaid programs, with revenues from these programs determined in whole or in part by the federal government and/or applicable state governments, and base premium rates may be affected by federal and state budgetary constraints. The company is subject to risks associated with the BCBSA license agreements, and upon termination of either license agreement, the BCBSA would have the right to impose a Re-establishment Fee of $98.33 ⁵⁵ per licensed enrollee, which if applied to the company's total Blue Cross and/or Blue Shield enrollees of approximately 34 million ⁵⁶ as of December 31, 2025, would result in an assessment of approximately $3 billion ⁵⁷ by the BCBSA. The company faces risks related to cyber-attacks or other privacy or data security incidents, and as of December 31, 2025, no known cybersecurity threats have materially affected the company, but future incidents could materially affect business strategy, results of operations or financial conditions. The company has substantial indebtedness outstanding, with total long-term debt of $31,896 ⁵⁸ million at December 31, 2025, and a consolidated debt-to-capital ratio of 42.1% ⁵⁹, and a downgrade in credit ratings could adversely impact business by limiting future borrowings and increasing borrowing costs.

Management's message emphasizes Elevance Health's purpose of improving the health of humanity and its focus on delivering integrated, whole health solutions across the care journey. The company is guided by values including an unyielding commitment to meeting the needs of diverse customers. Management highlights that the company is one of the largest health insurers in the United States in terms of medical membership, serving approximately 45.2 million ⁶⁰ medical members through its affiliated health plans as of December 31, 2025. The strategic priorities emphasized for the period ahead include continuing to rationalize the portfolio of businesses and products, aligning investments to optimize core businesses, investing in high-growth opportunities, and accelerating value creation through expanded capabilities and services. Management also emphasizes the importance of expanding through a combination of organic growth, strategic acquisitions and efficient use of capital in both existing and new markets, with a growth strategy designed to enable the company to take advantage of additional economies of scale and provide access to new and evolving technologies and products.