Key Takeaways
Elevance Health Inc.'s fiscal year 2025 (calendar year ended December 31, 2025) was a year of operational stabilization for the diversified health insurance and Carelon services platform through navigation of the multi-year Medicaid redetermination unwinding (the post-COVID resumption of Medicaid eligibility verifications by states that progressively reduced Medicaid covered population from approximately 95M peak in early FY2023 to approximately 79M by late FY2025) plus the Medicare Advantage Stars rating and medical loss ratio pressures that are also affecting peer health insurers (UnitedHealth Group covered separately): revenue of approximately $176-179B (+~3-5% YoY), net income of approximately $7.5-8B, and adjusted EPS of approximately $33-34 on approximately 232M diluted shares. The strategic identity that distinguishes Elevance Health (formerly Anthem before the October 2022 corporate rebrand to Elevance) from peer health insurance companies is the structural composition combining the dominant Blue Cross Blue Shield (BCBS) licensee position across 14 states (Anthem operates as the BCBS licensee in California, New York, Connecticut, Maine, New Hampshire, Indiana, Kentucky, Missouri, Nevada, Ohio, Virginia, Wisconsin, plus selected smaller territories) plus the rapidly scaling Carelon Services platform (Carelon Health, Carelon Rx PBM, plus selected emerging service capabilities) that addresses a similar strategic opportunity to UnitedHealth Group's Optum platform — vertical integration across health insurance + healthcare services. The investment thesis for Elevance in FY2026 centers on three structural questions: (1) whether the Medicaid segment stabilizes following the multi-year redetermination unwinding that reduced Elevance Medicaid membership materially (Elevance manages Medicaid populations across multiple state contracts, with cumulative redetermination impact concentrated in FY2023-FY2025); (2) whether the Medicare Advantage business navigates the Stars rating + MLR pressures that are affecting all major Medicare Advantage operators with FY2026-FY2027 contract year reimbursement reflecting the regulatory cycle; and (3) whether Carelon services revenue continues scaling toward the strategic vision of approximately $80B+ revenue by FY2027 (versus approximately $50B FY2025), establishing Carelon as a meaningful contributor to consolidated growth and margin profile.
Elevance Health's contemporary corporate identity emerged from the 1944 founding of Mutual Hospital Insurance (the Indiana Blue Cross plan that became part of WellPoint Health Networks then ultimately Anthem). The 81-year operational history transformed Anthem from a regional Blue Cross Blue Shield plan into the largest US BCBS licensee operator through landmark consolidation transactions (1996 conversion to a stock company, 2003 merger with Trigon Healthcare, 2004 merger with WellPoint Health Networks creating WellPoint Inc., 2006 acquisition of WellChoice for the New York BCBS license, 2014 corporate name change to Anthem Inc., October 2022 corporate name change to Elevance Health) plus selected smaller acquisitions. CEO Gail Boudreaux, who has led Elevance since November 2017 (succeeding Joseph Swedish), oversaw the strategic positioning that emphasized the Carelon services platform expansion, the deliberate Medicare Advantage growth strategy, and the operational discipline that has supported consistent earnings growth through multi-year health insurance industry cycles. The strategic identity that distinguishes Elevance from peer health insurance companies (UnitedHealth Group, Humana, Centene, Cigna, Molina) is the BCBS licensee structural advantage in 14 states (the BCBS brand commands premium recognition and network access across these states) combined with the rapidly scaling Carelon services platform that addresses the vertical integration opportunity that UnitedHealth Group's Optum has demonstrated over the past decade.
Business Structure
Elevance Health reorganized its segment reporting structure in 2024; the contemporary structure organizes around two primary segments aligned with health insurance and services activities.
Health Benefits (~$160B revenue, ~91% of total): The health insurance segment serving approximately 46-47M medical members across multiple product lines:
- Commercial Group (~$45B revenue, ~13M members): Group health insurance for employers — fully insured commercial group plans plus administrative-services-only (ASO) self-insured plans where Elevance administers benefits but employers fund claims directly. Commercial Group also includes ACA Marketplace individual products in Elevance's BCBS licensee states.
- Individual (~$10B revenue, ~3M members): Individual health insurance products including ACA Marketplace policies plus selected non-Marketplace individual plans.
- Government Business — Medicare (~$30B revenue, ~2M members): Medicare Advantage (Part C, the private Medicare alternative), Medicare Supplement (gap coverage), Medicare Part D prescription drug plans. Elevance's Medicare Advantage business is smaller than UnitedHealth Group (~8M MA members) and Humana (~6M MA members) but has been growing through selected market expansion plus product innovation.
- Government Business — Medicaid (~$75B revenue, ~28M members): Medicaid managed care across multiple state contracts. Medicaid is the largest revenue contributor among major US health insurers as Elevance has operated approximately 14 state Medicaid programs at significant scale. Medicaid membership compressed from approximately 33M peak in FY2023 to approximately 28M by FY2025 reflecting the multi-year redetermination unwinding.
Carelon Services (~$50B revenue, ~28% of total before eliminations; ~$16B after intercompany elimination): The diversified healthcare services platform similar in strategic positioning to UnitedHealth Group's Optum. Carelon sub-segments:
- Carelon Rx (PBM) (~$25-30B): Pharmacy benefit management serving Elevance health insurance members plus selected external clients. Carelon Rx is the third-largest US PBM after CVS Caremark and OptumRx (UnitedHealth Group), with selected commercial scale.
- Carelon Health (~$15-20B): Healthcare services across primary care, behavioral health, specialty pharmacy, post-acute care, plus selected clinical services. Carelon Health acquired multiple healthcare services businesses through FY2024-FY2025 building toward an integrated services platform.
- Carelon Insights (~$3-5B): Healthcare data and analytics services.
The Health Benefits + Carelon segment consolidation involves substantial intercompany eliminations (Carelon services delivered to Elevance health insurance members are eliminated for consolidated reporting) — the gross Carelon revenue of approximately $50B reduces to approximately $16B in consolidated reporting after eliminations.
Key Core Metrics Performance
Revenue, Margin, and EPS Trajectory (FY2021–FY2025)
| Fiscal Year | Revenue | Adj. Operating Margin | Adj. EPS | Medical Members (M) |
|---|---|---|---|---|
| FY2021 | ~$138.6B | ~5.7% | ~$25.31 | ~45.4 |
| FY2022 | ~$156.6B | ~5.8% | ~$28.22 | ~47.5 |
| FY2023 | ~$172.0B | ~5.9% | ~$33.14 | ~47.0 |
| FY2024 | ~$175.2B | ~5.5% | ~$33.04 | ~46.0 |
| FY2025 | ~$177B | ~5.5% | ~$33.85 | ~46-47 |
The pattern of revenue growth approximately 3-9% annually combined with adjusted operating margin compression from approximately 5.9% in FY2023 to approximately 5.5% in FY2024-FY2025 reflects multiple operational pressures: Medicaid redetermination compressing the higher-margin Medicaid revenue contribution, Medicare Advantage MLR pressure on rising specialist utilization, plus selected commercial group margin compression. The adjusted EPS recovery in FY2023 ($33.14) reflects the elevated post-COVID Medicaid contribution that has subsequently moderated through the FY2024-FY2025 redetermination unwinding.
Medicaid Redetermination Unwinding Impact
| Period | Medicaid Members (M) | Net Loss (M) | Medicaid Revenue Impact ($B) |
|---|---|---|---|
| FY2022 (pre-unwinding) | ~32.0 | (baseline) | ~$80B baseline |
| FY2023 | ~33.0 | +1.0 (still expanding) | ~$84B peak |
| FY2024 | ~30.0 | -3.0 (redetermination accelerating) | ~$78B (slight decline) |
| FY2025 | ~28.0 | -2.0 (continued reductions) | ~$75B |
The Medicaid redetermination unwinding — the post-COVID resumption of state Medicaid eligibility verifications that began in April 2023 — reduced Elevance's Medicaid membership by approximately 5M cumulative through FY2024-FY2025. The membership reduction has been associated with revenue compression of approximately $5-10B from the peak (rate increases on remaining members partially offset volume losses). The redetermination impact is substantially complete entering FY2026, supporting potential stabilization.
Carelon Services Growth
| Year | Carelon Revenue (gross, pre-eliminations) | Carelon Health | Carelon Rx PBM |
|---|---|---|---|
| FY2022 | ~$30B | ~$8B | ~$22B |
| FY2023 | ~$40B | ~$13B | ~$27B |
| FY2024 | ~$45B | ~$16B | ~$29B |
| FY2025 | ~$50B | ~$20B | ~$30B |
Carelon services revenue growing from approximately $30B in FY2022 to approximately $50B in FY2025 reflects both organic growth (Carelon Health expanding services scope, Carelon Rx PBM scaling) plus selected acquisitions. Carelon strategic vision targets approximately $80B+ revenue by FY2027 — significant continued growth ambition that requires both organic execution and additional strategic acquisitions.
Market Evaluation
Elevance Health trades at approximately 12-15x forward adjusted EPS — multiples consistent with US large-cap health insurance but reflecting the segment-specific challenges (Medicaid unwinding, Medicare Advantage Stars/MLR pressures). The bull case is Medicaid stabilization + Medicare Advantage margin recovery + Carelon scaling: if Medicaid redetermination unwinding completes substantially through early FY2026 with membership stabilizing at approximately 28-30M, if Medicare Advantage Stars rating recovery materializes for FY2027 contract year supporting elevated reimbursement, and if Carelon Services revenue continues toward the $70-80B FY2027 vision, adj. EPS could approach $36-38 by FY2027 with potential multiple expansion. The bear case is regulatory environment + competitive intensity: if Medicare Advantage payment policy from CMS continues compressing unit economics, if PBM regulation forces structural changes affecting Carelon Rx, or if commercial group margin compression continues, EPS growth could remain in low-single-digits with multiple compression risk.
Carelon Strategic Vision and the Vertical Integration Playbook
The strategic argument that frames Elevance Health's contemporary investment thesis under Boudreaux leadership rests on the Carelon strategic vision — the deliberate buildup of healthcare services capabilities that addresses a similar strategic opportunity to UnitedHealth Group's Optum platform. The strategic insight: vertical integration of health insurance with healthcare services creates economic value through (1) cost optimization (capitated care models where the integrated entity captures savings from preventive care + care coordination + appropriate utilization), (2) revenue capture (services revenue from Carelon Rx PBM + Carelon Health + Carelon Insights generates incremental revenue beyond the insurance premium), and (3) data integration (integrated medical + pharmacy + behavioral health data supports population health management capabilities that pure-play insurers or pure-play services companies cannot replicate).
The Carelon platform structure: Carelon Rx (the pharmacy benefit manager) provides PBM services to Elevance health insurance members plus selected external clients, generating approximately $30B annual revenue at favorable margins. Carelon Health (the diversified healthcare services platform) includes primary care services, behavioral health services, specialty pharmacy, post-acute care services, plus selected emerging clinical capabilities — Carelon Health revenue approximately $20B in FY2025 with substantial growth ambition. Carelon Insights (the healthcare data and analytics services) provides analytics platform services to Elevance plus selected external customers.
The competitive positioning versus UnitedHealth Group's Optum: Optum has been the dominant vertical integration platform among US health insurance companies, with Optum revenue exceeding $230B in FY2024-FY2025 and substantial integration with UnitedHealthcare insurance. Elevance's Carelon at approximately $50B revenue is meaningfully smaller but has been growing at approximately 15-20% annually — faster than Optum's growth rate as Carelon scales from a smaller base. The strategic vision: Carelon revenue targeted at $70-80B by FY2027 implies continued 15-20% annual growth that would establish Carelon as the second-largest healthcare services platform among health insurance company integrations (after Optum). The execution challenge is substantial: Optum has had a decade-plus head start in building the integrated platform, and competitive intensity in the PBM market plus the broader healthcare services market is significant.
The regulatory environment is the primary risk to monitor: the FTC's investigation of PBM consolidation practices plus state-level pharmacy benefit transparency requirements could affect Carelon Rx economics; the Medicare Advantage payment policy from CMS continues compressing unit economics that Carelon Health value-based care models depend on; potential federal proposals for PBM "delinkage" (separating PBM compensation from drug list prices) could affect the entire PBM industry economics. Elevance's strategic execution must navigate this regulatory environment while continuing the Carelon scaling that is fundamental to the long-term equity thesis.