By Sriparna Roy and Bhuyan Singh
(Reuters) – Elevance Health Inc beat Wall Street estimates for quarterly profit on Wednesday as the company spent less than expected on covering medical costs for its members.
Strength in the Carelon Healthcare Services unit, higher premiums and membership growth in Obamacare and commercial health plans helped drive second-quarter results, partly offsetting a decline in memberships for Medicaid plans.
Unlike rivals like UnitedHealth (NYSE:) and Humana (NYSE:), Elevance has less exposure to government-backed Medicare Advantage (MA) plans for people 65 and older, where medical costs have soared as seniors seek procedures that were delayed during the pandemic.
For the second quarter, Elevance’s medical loss ratio — the percentage of premiums spent on medical care — was 86.3%, slightly lower than the 86.4% recorded a year ago and the 86.42% analysts were expecting, according to LSEG data.
Bernstein analyst Lance Wilkes said the company’s medical costs support a high but stable backdrop for demand for health care services, in line with rival UnitedHealth’s earnings on Tuesday.
Carelon, which operates the pharmacy benefits management unit Elevance, reported revenue rose about 10% to $13.3 billion, helped by demand for its medical benefits and behavioral health management services, as well as the acquisition of Paragon Healthcare in the first quarter.
Membership in government-backed health insurance plans that help cover the cost of medical care for low-income people fell 23.2% to 9.03 million, Elevance said.
The company said at an industry conference last month that the decline in the number of people eligible for Medicaid plans this year due to the end of the pandemic-era policy has led to a shift in membership toward sicker patients who need more medical care.
In the second quarter, the company reported adjusted earnings of $10.12 per share, compared to estimates of $10.01 per share.