Elevance Health Announces Layoffs in Southern California
Photo: Dean Mitchell/Getty Images
In a significant move that underscores the challenges facing the healthcare sector, Elevance Health has announced the permanent layoff of 123 employees across two locations in Southern California. According to regulatory documents filed this month, the layoffs will affect 64 employees at the Carelon office in Cerritos and 59 at Anthem Blue Cross in Woodland Hills. This decision is part of a broader trend in the healthcare industry, where companies are grappling with financial pressures and operational adjustments.
The Financial Context
These layoffs come on the heels of a disappointing earnings call for Elevance Health, where the company reported a staggering 22.5% year-over-year decrease in net income for the third quarter. Following the announcement, shares of Elevance Health plummeted by 12%, reflecting investor concerns over the company’s lowered forecast for full-year earnings. The financial strain is attributed to several factors, including challenges within the Medicaid program and a mismatch between Medicaid rates and patient acuity.
Medicaid Challenges and Star Ratings
Elevance’s CEO, Gail Boudreaux, pointed to the complexities surrounding Medicaid as a significant contributor to the company’s financial woes. The timing mismatch between Medicaid rates and the acuity of patients has created a challenging environment for insurers. This issue is not unique to Elevance; it has also been cited by other major players in the industry, such as UnitedHealth Group, as a headwind affecting their earnings.
Moreover, Boudreaux indicated that the company is exploring various options in response to the Centers for Medicare and Medicaid Services’ (CMS) 2025 Medicare Advantage Star Ratings. Elevance has faced setbacks in its star ratings, which are crucial for determining reimbursement rates and overall performance in the Medicare Advantage program. Despite improvements in nearly 60% of the star measures for the payment year 2026, the lower ratings from the current year are having a tangible impact on the company’s operations.
Legal Battles Over Star Ratings
In a notable legal development, Elevance recently became the second insurer, following SCAN Health Plan, to win a case against the federal government regarding Medicare Advantage payments. The lawsuit centered on CMS’s decision to alter the methodology for determining star ratings, which included recalculating the 2023 cut points. Elevance argued that the use of simulated cut points instead of actual ones resulted in lower star ratings for several of its insurance plans, impacting its financial performance.
A Broader Industry Trend
The layoffs at Elevance Health are part of a larger trend in the healthcare sector, where other companies are also making significant workforce reductions. For instance, UnitedHealth Group’s subsidiary, Optum, announced 524 layoffs in California earlier this year. These cuts included 221 permanent layoffs in Los Angeles County, with a significant number occurring at urgent care facilities. The reasons behind these layoffs were not explicitly stated in Optum’s communications, but they reflect the ongoing challenges faced by healthcare providers in a rapidly changing landscape.
The Human Impact
The impact of these layoffs extends beyond the numbers. For the affected employees, the news brings uncertainty and anxiety about their future. The healthcare sector has long been viewed as a stable career choice, but these recent developments highlight the volatility that can arise from economic pressures and regulatory changes. As Elevance Health and other companies navigate these challenges, the focus will likely shift toward finding sustainable solutions that balance financial performance with the need to provide quality care.
Looking Ahead
As Elevance Health and its competitors grapple with these issues, the healthcare industry will continue to evolve. Stakeholders will be watching closely to see how these layoffs affect the companies’ operations and the broader implications for the healthcare workforce. The ongoing dialogue around Medicaid, star ratings, and the financial health of insurers will remain critical as the industry seeks to adapt to a changing environment.
Jeff Lagasse is the editor of Healthcare Finance News. For further inquiries, you can reach him at jlagasse@himss.org. Healthcare Finance News is a HIMSS Media publication, dedicated to providing insights and updates on the healthcare finance landscape.