Elevance Health is one of the largest health insurers in the United States, serving approximately 45.2 million medical members as of December 31, 2025. The company collects monthly premiums from individuals, employers, and government programs in exchange for covering members' medical costs. It operates under the Anthem Blue Cross and Anthem Blue Cross and Blue Shield names across 15 states, and also runs Wellpoint and Carelon brands for Medicaid, Medicare, and health services customers. On top of insurance premiums, the company earns fees from employers who manage their own health costs but pay Elevance to handle paperwork and provider networks. A third stream comes from CarelonRx, its pharmacy services arm, which fills prescriptions and manages drug benefits for both its own members and outside customers. The diagram below traces where the money goes.
How Elevance Health Makes Money
flowchart LR
A["Members Enroll
45.2M medical members"] --> B["Risk-Based Plans
Premiums charged"]
A --> C["Fee-Based Plans
Administrative fees"]
B --> D["Total Revenue
$199.1B"]
C --> D
E["Government Programs
32% of revenues"] --> D
F["Pharmacy Services
CarelonRx"] --> D
D --> G["Care Management
Reduced costs"]
G --> H["Provider Networks
Negotiated rates"]
H --> B
H --> C
D --> I["Carelon Services
Whole health solutions"]
I --> G
I --> J["Member Retention
Better outcomes"]
J --> A
D --> K["Operating Income
89.4% margin"]
K --> L["Reinvestment
Network expansion"]
L --> H
Five years of financial data tell a story of a company growing its revenue fast while its ability to turn that revenue into cash has moved in the opposite direction. Revenue climbed from $138.6 billion in 2021 to $199.1 billion in 2025. That is meaningful growth. But the cash the business actually generated from operations tells a different story.
Operating Cash Flow (2021 to 2025, $B)
Operating cash flow has declined every year since 2021, even as revenue grew from $138.6B to $199.1B over the same period.
Operating cash flow was $8.4 billion in both 2021 and 2022. By 2025 it had fallen to $4.3 billion. Free cash flow, the money left after paying for equipment and infrastructure, dropped from $7.3 billion in 2021 to $3.2 billion in 2025. The company's net debt also rose, from $18.2 billion in 2021 to $22.6 billion in 2025. Revenue is going up. Cash generation is going down. That gap is the central tension in this story.
$199.1B
Total revenue in 2025, up from $138.6B in 2021
Part of the cash decline in 2025 reflects a one-time payment: the company settled a long-running antitrust lawsuit brought by healthcare providers and recognised a $666 million payment obligation in 2024, with the settlement becoming effective in September 2025. But even setting that aside, the trend in cash generation had already been falling for years before that payment landed. Medical costs are rising faster than the company can consistently price for them, and that pressure is visible in the gross margin numbers too, which slipped from 92.1% in 2021 to 88.8% in 2024 before recovering slightly to 89.4% in 2025.
What Is a Medical Loss Ratio?
Health insurers collect premiums and then pay out claims when members use healthcare. The share of premiums spent on actual medical care is called the medical loss ratio. When healthcare costs rise faster than premiums, this ratio goes up and profit margins shrink. Insurers set prices a year in advance, so they cannot raise prices mid-year if costs surprise them on the upside.
This pricing problem is the single biggest documented risk in the company's own filings. Elevance has to predict how much its members will spend on healthcare, then lock in a price before the year begins. If members use more care than expected, the company absorbs the loss. The company's 10-K notes that Medicaid cost trends remain elevated due to higher patient acuity and increased use of services. It also notes that members who shifted from Medicaid into individual insurance plans after pandemic-era eligibility rules ended brought higher medical needs with them, pushing costs up across the market.
$3.2B
Free cash flow in 2025, down from $7.3B in 2021
How Medicare Star Ratings Affect Health Insurers
The US government scores Medicare Advantage health plans on a scale of one to five stars based on quality and member experience. Plans that earn four stars or higher receive bonus payments from the government and are allowed to enroll new members year-round. Plans rated below four stars lose those bonuses, which directly reduces revenue.
Medicare is a growing part of Elevance's business, and the Star Ratings system creates real financial risk. In 2025, only 40% of the company's Medicare Advantage members were enrolled in plans rated at least 4.0 stars, meaning a large majority of Medicare members were in plans that did not qualify for bonus payments. The 2026 ratings improved: approximately 59% of Medicare Advantage members are now in plans rated at least 4.0 stars. That shift matters because bonus payments influence how much revenue those plans generate in 2027. But the ratings system changes frequently, and the company's own filings describe it as hard to predict.
2025
crisis
Federal Legislation Reshapes Medicaid and Individual Markets
The One Big Beautiful Bill Act, signed into law on July 4, 2025, introduced more frequent Medicaid eligibility checks, work requirements for some Medicaid expansion adults, and new cost-sharing rules. Enhanced subsidies that had driven strong individual market enrollment also expired on December 31, 2025. Both changes could reduce the number of members Elevance serves in its government-funded programs, which generated approximately 32% of total consolidated revenues in 2025.
Government-funded programs are a significant and growing piece of the business. The company generated approximately 32% of its total consolidated revenues from US government agencies in 2025, compared to 31% in 2024 and 29% in 2023. That growing reliance on government funding means that changes to what Washington and state governments pay, how they calculate those payments, and who qualifies for coverage all flow directly into Elevance's revenue. The company's filings flag ongoing audits by the Centers for Medicare and Medicaid Services that could result in retroactive reductions to past payments. In 2025, subsidiaries in New York and Connecticut also faced lawsuits alleging that their provider networks did not actually have enough available doctors, a practice the lawsuits call ghost networks.
Elevance's pharmacy services agreement with CVS Health runs through December 31, 2027. The company can extend it for three years on the same terms, but how it manages that relationship after 2027 could affect how CarelonRx competes and whether its pharmacy margins hold.
The company's revenues are also concentrated geographically. Eight states, California, New York, Virginia, Indiana, Ohio, Georgia, Florida, and Texas, account for a large share of the business. A regulatory shift or economic downturn in any of those states could have an outsized effect on results. Meanwhile, the company carries $22.6 billion in net debt as of 2025, up from $16.7 billion in 2022, which limits how much financial cushion exists if costs continue to outpace pricing.
Net debt has grown by nearly $6 billion over three years, even as free cash flow has fallen sharply over the same period.
The Bet
Elevance can accurately predict what its members will spend on healthcare, price its products to cover those costs, and rebuild the cash generation that has declined for four consecutive years, all while managing tighter government payment rates, frequent regulatory changes, and a Medicare Star Ratings system that shifts the bonus payment pool in ways that are hard to forecast. If healthcare costs continue rising faster than the company prices for them, and if government programs pay less or serve fewer members due to new legislation, the revenue growth of recent years will not translate into the cash flow growth needed to service rising debt and sustain the business.
Open question
Elevance Health is a large, deeply embedded piece of the American healthcare system, with 45.2 million members and revenues of $199.1 billion in 2025. But its cash generation has fallen sharply even as revenue has climbed, its debt has grown, and the government programs it increasingly depends on are being actively reshaped by legislation. Can Elevance reprice its products fast enough and accurately enough to close the gap between rising medical costs and falling cash flow, before the weight of higher debt and shifting government policy makes that task significantly harder?
Compiled · 10-K · FY2025
Healthcare Cost Prediction and Pricing
The company's profits depend on correctly predicting how much healthcare will cost and charging customers enough to cover those costs. If actual medical costs turn out higher than predicted, the company cannot raise prices mid-year to make up the difference, which could significantly reduce profits.
Medicare and Medicaid Payment Rates
The federal government and states determine how much the company gets paid for Medicare and Medicaid members, and they can reduce these payments, delay them, or even cancel contracts. Changes to payment calculations, like the recent changes to how Medicare Advantage risk scores are calculated, can substantially reduce expected revenue.
Medicare Star Ratings System
The company's Medicare plans are rated on a star system by the government. Plans with 4.0 or higher stars get bonus payments and can enroll year-round, but the rating system changes frequently and is hard to predict. Currently only 59% of the company's Medicare members are in plans rated 4.0 stars or higher, down from 40% the prior year.
Regional Revenue Concentration
The company has large concentrations of business in eight states: California, New York, Virginia, Indiana, Ohio, Georgia, Florida and Texas. Economic downturns or regulatory changes in these states could significantly reduce the company's overall revenue and profitability.
Government Audits and Data Corrections
The company faces ongoing audits by CMS and state agencies that can result in large retroactive payments being reduced, fines being imposed, or contract eligibility being lost. The company currently has pending audits that could result in significant adjustments to past payments received.
10-K Item 1A · Risk Factors
