Anthem — Key Risks
Healthcare Cost Prediction Is the Core Business Challenge
Elevance's profit depends on charging premiums today for care that happens months later — and if actual medical costs exceed those estimates, there is no way to recover the shortfall mid-contract. Medical cost inflation, rising drug prices, new treatments, and unpredictable utilization patterns all make this a constant challenge. Even a small percentage miss on cost estimates can translate to a large dollar impact given the scale of the business.
Government Programs Create Revenue Risk Beyond the Company's Control
A large portion of Elevance's revenue comes from Medicare Advantage and Medicaid, where payment rates are set by federal and state governments — not negotiated freely. CMS can change how it calculates risk adjustment factor (RAF) scores (a measure of how sick a member is, which determines how much the government pays), as it did with the "version 28" model update, directly affecting revenue. States can also retroactively adjust Medicaid rates or cancel contracts entirely if funds run out.
Medicare Star Ratings Directly Affect Revenue and Membership
CMS assigns Star Ratings to Medicare Advantage plans; plans rated 4.0 or above earn quality bonus payments and attract more members. Currently, about 59% of Elevance's Medicare Advantage members are in 4-star-or-higher plans (up from 40% under 2025 ratings) — but CMS changes the scoring rules regularly and often after the measurement period has already ended. Losing star rating standing means losing bonus money and becoming less competitive in a market where seniors actively comparison-shop.
The Blue Cross Blue Shield License Is Essential and Carries a Massive Exit Penalty
Elevance serves approximately 34 million members under its Blue Cross and Blue Shield (BCBS) brand licenses. If these license agreements were terminated — due to noncompliance or other triggers — the company would owe a re-establishment fee of roughly $3 billion (calculated at $98.33 per enrolled member) and would lose the right to use the BCBS names in its territories, potentially handing those markets to a competitor.
Pharmacy Benefit Management Faces Sweeping Regulatory Overhaul
The recently passed Consolidated Appropriations Act of 2026 requires pharmacy benefit managers (the middlemen who negotiate drug pricing and rebates) to pass all manufacturer rebates directly to commercial plan sponsors and bans percentage-based compensation in Medicare Part D starting in 2028. California has enacted similar rules at the state level. These changes threaten a meaningful piece of how pharmacy services businesses have historically earned revenue, and further legislation at the state or federal level remains possible.
Goodwill Represents Nearly a Third of Total Assets
As of December 31, 2025, Elevance carried approximately $39.5 billion in goodwill and intangible assets — roughly 32.5% of total consolidated assets. This reflects the premium paid in past acquisitions. If those acquired businesses underperform expectations, or if regulatory or market conditions change, accounting rules could require the company to write down that value, reducing reported earnings and potentially affecting debt ratios and credit ratings.