Elevance Health posted a strong third quarter and used its earnings update to flag a likely decline in Medicaid enrollment in 2026, underscoring a potential shift in the company’s mix of business that analysts say could have multi-year revenue and margin implications. Management framed the expected membership contraction as part of a broader policy and budget conversation unfolding at both the federal and state levels.

“We're really proud of the role that we play in the ACA marketplace, and we still remain very committed to the affordable access for individuals and families who rely on these plans,” CEO Gail Boudreaux said, while stressing the company is positioning itself to navigate uncertainty around federal subsidies. “We are ready and prepared for a range of policy outcomes, including both the renewal and potential modification of those enhanced subsidies.”

The combination of a stronger commercial book and a forecasted drop in Medicaid membership next year highlights the delicate balance insurers face as pandemic-era protections unwind and states resume routine eligibility redeterminations. While Medicaid has historically provided scale and steady membership, it typically operates with lower margins than commercial coverage; a shift away from Medicaid could therefore alter revenue composition even if total membership remains substantial.

Boudreaux also pointed to a receptive posture among states toward strategies aimed at containing Medicaid costs. “One of the things that's changed, certainly in the conversations this time around, is states are certainly more receptive to ways that can help reduce the overall cost of the Medicaid program and improve affordability. So, one of the things that we've been doing is providing them with options around the levers that they have that can certainly address some of the program changes that are increasing cost and utilization in the program,” she said.

That management perspective signals an increased role for insurers in shaping state-level policy, from benefit design and care management to provider payment reforms. For insurers such as Elevance, which operate across commercial, Medicare and Medicaid lines, changes at the state level can have immediate operational consequences and influence pricing and reserve planning.

Investors and policymakers will be watching how much of the projected 2026 decline reflects administrative redeterminations versus substantive eligibility changes. If enrollment losses are concentrated among lower-acuity beneficiaries, the fiscal hit to state budgets and insurers may be limited. If higher-need populations lose coverage, however, cost-shifting to other payers and greater uncompensated care in hospitals could follow.

In the near term, Elevance’s assurance that it is prepared for a range of subsidy outcomes on the ACA exchanges matters for millions of marketplace enrollees and for insurers’ exchange strategies. Enhanced subsidies have been a key driver of exchange growth and profitability; any modification would recalibrate risk selection, premium dynamics and federal fiscal exposure.

As states and Washington weigh policy choices, Elevance’s comments underscore how health insurers are increasingly active participants in the design of public programs, seeking to align financial sustainability with access and affordability amid a shifting post-pandemic policy landscape.