Elevance Health Shrinks to Grow Stronger: From Part D to Plan B?

Elevance Health, Inc. ELV is reshaping its Medicare strategy by stepping away from certain underperforming Medicare Advantage markets and fully exiting the standalone Part D segment. The move comes as health insurers brace for a turbulent 2026, and it could help Elevance protect profitability while sharpening its competitive edge.

Rather than spread itself thin, Elevance is channeling resources into Medicare Advantage HMO as well as dual-special needs plans (D-SNPs), which typically generates stronger margins and attracts steady enrollment growth. The company’s trailing 12-month return on capital stands at 10.4%, notably above the industry’s 7.4% average, suggesting it has room to navigate headwinds with discipline.

The exit will impact roughly 150,000 of Elevance’s total 2.3 million Medicare Advantage members. With medical costs rising and reimbursement pressures mounting, such retrenchment reflects a broader industry theme: insurers recalibrating to safeguard margins. Indeed, the challenge of underestimated medical costs has forced many to revise their outlooks.

UnitedHealth Group Incorporated UNH, the market leader, and Molina Healthcare, Inc. MOH have also trimmed their 2025 forecasts alongside Elevance. ELV now expects 2025 adjusted EPS of about $30, down from its prior $34.15–$34.85 range. UnitedHealth slashed its adjusted net EPS outlook to at least $16, abandoning its previous $26–$26.50 target. UNH is also expected to withdraw from certain Medicare Advantage markets, impacting an estimated 600,000 beneficiaries. Molina Healthcare lowered its 2025 adjusted EPS forecast to at least $19, down from $24.50.

Elevance’s exit from Part D will likely further reshape the landscape. According to KFF, the company ranks as the sixth-largest standalone Part D provider. Its departure will reduce choices for beneficiaries, a continuation of the recent trend. The insurer also faces financial strain from losing a legal battle over its 2025 star ratings. That setback is projected to cost approximately $375 million next year, per reports.

As the Medicare Advantage environment grows more complex, ELV is betting that sharper focus, tighter cost discipline and resilience in core products will put it on firmer footing for the years ahead.

Elevance’s Price Performance, Valuation and Estimates

Shares of ELV have lost 14.6% in the year-to-date period compared with the industry’s decline of 2.9%.

From a valuation standpoint, Elevance trades at a forward price-to-earnings ratio of 10.06, down from the industry average of 14.90. ELV has a Value Score of A at present.

The Zacks Consensus Estimate for Elevance’s 2025 earnings is pegged at $29.88 per share, implying a 9.6% decline from the year-ago period.

The stock currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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