Elevance Health Q2 2026: profit fell 16.1% to $1.46B (EPS $6.71) as Medicaid and Medicare costs pushed the benefit expense ratio to 89.7%, yet a beat and higher investment income let it raise full-year adjusted EPS guidance to at least $27.00.
Revenue
$50.5B
+1.4% YoY
Net income
$1.5B
-16.1% YoY
Diluted EPS
$6.71
-13.1% YoY
Operating margin
3.5%
Overview
Elevance Health — a Blue Cross Blue Shield licensee and one of the largest US health insurers by medical membership, plus the Carelon pharmacy and health-services businesses — earned $1.46 billion in the second quarter of 2026, 16.1% less than a year earlier, on total revenue of $50.5 billion (+1.4%). Diluted earnings per share (EPS) fell 13.1% to $6.71; the drop in EPS is smaller than the drop in profit because the company bought back stock, cutting its average diluted share count by 3.5% to 217.9 million.
The core problem is medical costs. Elevance's premiums were flat year over year ($41,279 million vs. $41,271 million) while the medical bills it paid on behalf of members rose, so its health-insurance segment's operating profit fell 42.6%. Management still raised its full-year outlook, because the quarter came in ahead of its own plan and investment income jumped.
Key Figures — Q2 2026
Metric
Q2 2026
Q2 2025
YoY Change
Total revenue
$50,474M
$49,776M
+1.4%
Operating revenue (premiums, products, fees)
$49,826M
$49,421M
+0.8%
Shareholders' net income
$1,463M
$1,743M
-16.1%
Diluted EPS (GAAP)
$6.71
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Operating margin (operating gain ÷ operating revenue)
3.5%
4.9%
-1.4 pts
Benefit expense ratio
89.7%
88.9%
+0.8 pts
Operating expense ratio
11.1%
10.1%
+1.0 pts
Total medical membership (June 30)
44.95M
45.62M
-1.5%
"Operating margin" here is Elevance's own measure: operating revenue minus medical costs, drug costs and running costs, before investment income, interest, amortization and tax. On a plain GAAP basis, pre-tax income was 3.8% of total revenue, down from 4.6%.
The benefit expense ratio: where the premium dollar went
For an insurer, the single most important number is the benefit expense ratio — the share of every premium dollar that gets paid back out as medical claims. At 89.7%, Elevance paid out almost 90 cents of every premium dollar on care, leaving about 10 cents to cover salaries, technology, taxes and profit. That ratio rose 0.8 percentage points from 88.9% a year ago. On a $41 billion premium base, a 0.8-point move is worth roughly $330 million of pre-tax profit.
What drove it, per the 10-Q: "expected elevated medical cost trend in our Medicaid and Medicare businesses, partially offset by improved performance in our Individual ACA business."
Medicaid (state-run coverage for low-income people). The 10-Q says Medicaid "cost trends remain elevated due to higher population acuity and increased utilization of services." In plain terms: after states finished re-checking eligibility (the "redetermination" process that ran from 2023 through 2025), the healthier people tended to leave the program, so the members who remain are sicker on average and use more care — but state payment rates are set in advance and lag behind that change.
Medicare (coverage for people 65+). Also cited as an area of elevated cost trend this quarter, even as Elevance shrank its Medicare Advantage book on purpose (see membership below).
Individual ACA plans (policies bought on the Obamacare exchanges). This was the offset. Elevance had flagged that the ACA risk pool got sicker ("a market-wide increase in morbidity") as healthier people left; repricing appears to be working. Individual ACA revenue rose 16.8% to $2,720 million from $2,328 million even as individual membership fell 2.3%, i.e. the gain came from higher prices per member, not more members.
For the first half, the ratio was 88.3% vs. 87.7%. Part of the first half was also helped by claims from late 2025 coming in cheaper than Elevance had reserved for: $1,195 million of favorable "prior-year development" in the six months, up from $1,065 million a year earlier. Reserve releases like this flatter the current-year ratio and can't be counted on to repeat.
Medicare Advantage fell 15.9% because of what the 10-Q calls "deliberate repositioning" — Elevance chose to shrink this book rather than keep underpriced business. Medicare revenue fell 4.2% to $10,962 million as a result.
Medicaid fell 4.3%, which the company attributes mainly to eligibility redeterminations — members it didn't choose to lose, and who left behind a costlier pool.
Membership where Elevance carries the medical-cost risk shrank, while "fee-based" membership (large employers that pay their own claims and pay Elevance to administer them) grew 1.3%. That shift lowers risk but also lowers revenue per member. Sequentially, total membership dropped 469,000 from March, which the earnings release (8-K Exhibit 99.1) attributes to "a known commercial fee-based customer transition" and expected ACA and Medicaid attrition.
Segment results
Segment (Q2, $M)
Operating revenue
YoY
Operating gain
YoY
Margin (Q2 26 vs. Q2 25)
Health Benefits
42,720
+2.7%
896
-42.6%
2.1% vs. 3.8%
CarelonRx
11,250
+5.7%
582
+8.6%
5.2% vs. 5.0%
Carelon Services
7,975
+7.2%
366
-8.5%
4.6% vs. 5.4%
Corporate & Other
6
-97.4%
(81)
loss widened
—
Total
49,826
+0.8%
1,763
-27.3%
3.5% vs. 4.9%
Health Benefits (the insurance business) earned $896 million on $42.7 billion of revenue — a 2.1% margin. The 10-Q attributes the decline to "higher overall medical costs and increases in targeted investments to support and strengthen our workforce and accelerate technology adoption." Revenue growth came from premium increases across all lines, offset by the Medicare Advantage and Medicaid losses.
CarelonRx (pharmacy benefit management and specialty pharmacy) was the bright spot: operating gain up 8.6% "primarily due to improved specialty pharmacy profitability." Revenue rose on higher revenue per prescription even though adjusted script volume fell 2.9% to 80.9 million.
Carelon Services (behavioral health, specialty care management, post-acute and home care services) grew revenue 7.2% by taking on more risk-based contracts, but profit fell 8.5% on "less favorable results on certain contracts and lower health plan membership within our post-acute solutions services." Taking on risk-based work raises revenue faster than profit, and exposes this segment to the same cost pressure as the insurer.
GAAP vs. adjusted EPS
Elevance reports an "adjusted" EPS that strips out items it considers non-recurring or non-operating (intangible amortization, investment losses, deal and litigation costs). In Q2 the gap was modest: $6.71 GAAP vs. $7.45 adjusted, a $0.74 difference. Both fell by a similar amount (-13.1% and -15.7%).
Two points worth knowing:
The earnings release says Q2 adjusted EPS included "an approximately $0.80 per share net below-the-line benefit" — that is, from items below operating gain such as investment income, which the 10-Q shows rose 44.9% to $704 million on "higher income from alternative investments." Without it, adjusted EPS would have been nearer $6.65, and operating results carried less of the quarter than the headline suggests.
Year to date the gap is much wider: GAAP EPS of $14.73 (-15.0%) vs. adjusted $20.06 (-3.7%). The difference is mostly a $935 million charge in Q1 for potential repayments to CMS (the federal Medicare agency) over historical Medicare Advantage risk-adjustment data — diagnosis codes used to set how much Medicare pays per member for 2015–April 2023. On July 13, 2026 CMS told Elevance it had completed the required steps and closed enforcement with no sanctions. Elevance paid $342 million in May and still carries a $593 million accrual; the 10-Q says the final cost could be up to $320 million lower or higher than the original estimate.
First-half picture
Metric (six months)
H1 2026
H1 2025
YoY Change
Operating revenue
$99,320M
$98,186M
+1.2%
Shareholders' net income
$3,227M
$3,926M
-17.8%
Diluted EPS (GAAP)
$14.73
$17.33
-15.0%
Adjusted diluted EPS
$20.06
$20.82
-3.7%
Benefit expense ratio
88.3%
87.7%
+0.6 pts
Operating cash flow
$6,245M
$3,071M
+103%
Operating cash flow doubled on "favorable working capital impacts," per the 10-Q — timing (including a state Medicaid pass-through payment, per the earnings release), not a doubling of underlying earnings.
Takeaway: Elevance "beat and raised" in a quarter where its insurance business earned 42.6% less than a year ago. The raise is real but small (+$0.25 to at least $27.00 adjusted EPS), and about $0.80 of Q2's $7.45 adjusted EPS came from below-the-line items such as investment income rather than from insurance. The core question — whether premium increases can catch up with Medicaid and Medicare cost trend — is not yet answered by this quarter.
Guidance and outlook
Guidance was raised, not cut:
FY 2026 guidance
After Q1 (Apr 22)
After Q2 (Jul 15)
GAAP diluted EPS
at least $19.85
at least $20.10
Adjusted diluted EPS
at least $26.75
at least $27.00
Operating cash flow
at least $5.5B
at least $6.0B
Sources: Q1 and Q2 earnings releases (8-K Exhibit 99.1). In a September 10, 2026 8-K, Elevance said its officers would reaffirm both EPS figures in investor meetings, along with a full-year benefit expense ratio of 90.2% ± 0.5 points.
That benefit-ratio guide is the most telling number for the second half. The first half ran at 88.3%. If second-half premiums are similar in size to the first half's (our assumption, not company guidance), a 90.2% full-year ratio implies roughly 92% in the second half — i.e., management expects medical costs to take a clearly bigger bite in Q3 and Q4, which is normal seasonality for insurers (members hit deductibles as the year goes on) but also leaves little cushion. The EPS math points the same way: $20.06 of adjusted EPS is already banked, so "at least $27.00" requires only about $6.94 across the whole second half, less than Q2 alone earned.
Our read: the guidance is set conservatively enough to beat again, but the business underneath is still in repair. The things to watch in Q3 are whether the Medicaid cost trend eases as state rate updates arrive, whether ACA repricing keeps holding up, and whether Carelon Services' risk-based contracts stop diluting its margin. CEO Gail Boudreaux's stated target of "at least 12% adjusted EPS growth in 2027 off our 2026 earnings baseline" depends mostly on the first of these.
Source: Elevance Health Form 10-Q for the quarter ended June 30, 2026 (filed July 15, 2026). Adjusted EPS, guidance, sequential membership commentary and the ~$0.80 below-the-line benefit are from the company's Q1 and Q2 2026 earnings releases (8-K Exhibit 99.1) and the September 10, 2026 8-K. Adjusted EPS is a non-GAAP measure defined by the company.