ELV

Elevance Health ($ELV) CEO's $2.44M Purchase: Bottom-Fishing Signal After 43% Plunge?

07/18/2025 17:47

Elevance Health ($ELV) CEO Gail Boudreaux executed a significant $2.44 million insider purchase on July 17, acquiring 8,500 shares at $287.05 per share immediately following the company's earnings announcement. This marks a dramatic reversal from the pattern of executive selling over the past year, representing a strong confidence signal from leadership as shares hit their lowest point of the year. Elevance Health is the second-largest health insurer in the United States, serving 47 million members through Medicaid and Medicare Advantage plans. Formerly known as Anthem, the company operates as a key member of the Blue Cross Blue Shield network, maintaining its position as the industry's second-largest player behind UnitedHealth Group. The company holds particularly strong market share in government insurance programs and has been pursuing vertical integration strategies through its healthcare services division, Carelon. Boudreaux's purchase represents the first insider buying activity in nearly a year, contrasting sharply with the July 22, 2024 sale of 34,000 shares at $501.74. Notably, the purchase price of $287.05 was executed at a 5% discount to the current share price of $302.45, suggesting the CEO views the recent decline as excessive. Elevance shares have fallen 43% from their June 2024 high of $535 to the current level of $302 in July 2025. The particularly sharp decline from $396 on July 2 to $302 on July 17 - a 24% drop in just two weeks - reflects the market's negative reaction to the company's earnings guidance and warnings about rising medical costs in the Medicaid business. However, industry experts note several differentiating factors that set Elevance apart from its peers. The company reported a 10.2% increase in Medicare Advantage membership in January, contrasting with membership declines at competitors. This growth comes at a time when UnitedHealth Group faces unexpected earnings challenges, positioning Elevance as a relatively stable performer in a turbulent sector. The first positive signal investors should monitor is the 5.06% increase in Medicare Advantage reimbursement rates for 2026. This substantially exceeds the initially proposed 2.2% increase and represents a direct profitability catalyst for Medicare Advantage-focused insurers like Elevance. The enhanced rates should help offset some of the cost pressures the industry has been experiencing. Second, investors should track the company's medical loss ratio (MLR) trends. Elevance projects a 2026 MLR around 90%, which while elevated compared to historical levels, suggests potential for gradual improvement. If Trump administration Medicaid policy changes are implemented, a shift toward healthier member composition could drive MLR improvements. The third key metric to watch is growth in the Carelon business unit. Elevance is transforming from a pure insurance provider to an integrated healthcare company, following UnitedHealth Group's Optum model. This diversification strategy should contribute to revenue diversification and margin improvement over time. However, significant risk factors remain clear. The primary concern is structural challenges in the Medicaid business. Post-pandemic Medicaid re-enrollment processes have resulted in the departure of relatively healthy members, creating an adverse selection problem that increases medical costs in the near term. Additionally, expanded Medicare Advantage audits by the federal government present potential headwinds. Comprehensive audits of 2018-2024 payments are scheduled for completion by early 2026, potentially resulting in overpayment recoveries and margin pressure. While this affects the entire industry, Elevance is not immune to these regulatory pressures. The most likely scenario involves near-term challenges followed by gradual recovery. Medicaid member composition deterioration appears to be a temporary phenomenon, with Medicare Advantage reimbursement rate increases taking effect beginning in 2026. The CEO's substantial purchase likely reflects confidence in this recovery trajectory. In an optimistic scenario, Trump administration Medicaid reforms could actually improve member composition while Medicare Advantage rate increases significantly enhance profitability. Under these conditions, current share prices would represent excessive discounting of the company's prospects. Conversely, the risk scenario involves prolonged medical cost pressures. Structural factors including population aging and advancing medical technology could offset reimbursement rate increases, potentially leading to continued share price pressure. Overall, the CEO's $2.44 million purchase provides a strong signal that current share prices significantly undervalue the company's intrinsic worth. Despite industry-wide structural challenges, Elevance's differentiated competitive positioning and potential benefits from policy changes suggest current levels may represent an attractive entry point for long-term investors. However, near-term volatility and industry-wide uncertainties warrant a cautious approach.