(Bloomberg) -- The largest US health insurers jolted investors twice in the span of three days with cuts to their forecasts that sent stock prices tumbling — leaving Wall Street wondering whether more surprises lay ahead.

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Elevance Health Inc. said Thursday that adjusted earnings per share will be flat this year and rise more slowly than it had targeted for 2025. That followed Tuesday’s disappointing forecasts through the end of next year from rival UnitedHealth Group Inc.

Between Monday’s close and Thursday morning, the news erased $55 billion from the companies’ combined market value. Elevance shares lost as much as 20% Thursday, while United Health lost 8.1% the day it issued its outlook. For each, it was the biggest intraday drop since March 2020, when fears of the emerging pandemic’s health toll temporarily sent the industry reeling.

Insurers have enjoyed years of growth driven by Medicare and Medicaid, government health programs that cover about more than one in three Americans. Now, the companies face rising challenges in the taxpayer-funded business lines as costs for Medicaid patients rise and Washington cracks down on Medicare payments that officials have said are too high.

Elevance blamed its miss on outsized costs in its Medicaid business for low-income Americans. States have cut 14 million people from the safety net health program since early 2023, unwinding an expansion of coverage that dated from Covid-19 emergency measures.

Executives cited “unprecedented challenges” in Medicaid but had little to say about how they were caught flat-footed by such a widely anticipated event. Elevance management “showed an almost shocking lack of transparency” about what’s behind the fast-rising costs, said Spencer Perlman, an analyst at policy research group Veda Partners.

Medicaid Difference

In most business lines, insurers can raise prices once a year, so if they underestimate future costs they can correct course. Medicaid is different. Insurers bid on multi-year contracts to run state health programs.

If they find rates to be insufficient in the middle of a contract, they can haggle with states for more money, but getting it may take a while, as Elevance executives acknowledged. States often base decisions on data a year old, Elevance Chief Executive Officer Gail Boudreaux told analysts Thursday.

“It has not kept pace yet and we think it will take them some time,” she said. She described the problem as “time-bound” and industry-wide.

The Medicaid purge was always expected to affect insurers, as healthy people dropped off coverage while those who need more care were more likely to retain it. What’s not clear is if the changes will hit Medicaid-focused rivals like Centene Corp. and Molina Healthcare Inc. with the same intensity. It comes down to whether Elevance’s troubles are a result of policy or poor execution, Perlman said.

Centene and Molina are due to report results next week. “We don’t know if they’re experiencing the same thing,” Perlman said.

Government Growth

Medicaid payments have hurt UnitedHealth, but the company’s bigger challenge is in Medicare, the federal insurance program for older and disabled Americans.

Government watchdogs and whistleblowers for years accused insurers of pumping up their payments in private Medicare Advantage plans by exaggerating how sick their members were. This year, Medicare officials began phasing in new payment rules meant to limit that.

The change, combined with smaller payment updates than the industry got used to, squeezed Medicare Advantage insurers. UnitedHealth Chief Executive Andrew Witty likened it to a “price cut” from the government on a call with analysts.

Elevance, meanwhile, sounded reassuring notes about its Medicare business, which is much smaller than that of UnitedHealth.

For health investors, the upcoming US presidential election add another element of uncertainty. A win for Republican candidate Donald Trump is expected to bring more favorable rates to private Medicare plans, which could bolster shares of UnitedHealth, Humana and CVS Health Corp. A victory for Vice President Kamala Harris would likely be more favorable to insurers focused on Medicaid and Affordable Care Act plans, including Elevance, Centene, and Molina.

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