The ongoing dispute surrounding the Medicare Advantage star rating system continues to unfold, as several health insurers pursue legal challenges against the ratings issued by the Centers for Medicare & Medicaid Services (CMS).
In recent years, numerous lawsuits have emerged regarding CMS’s star ratings assessments, yielding inconsistent outcomes for various plans. Some insurers, such as SCAN and Elevance, have found legal success, while others, like Humana, have encountered unfavorable rulings. Following the successes of SCAN and Elevance, CMS has recalculated the star ratings for 2024 after a judge determined that the agency did not follow the proper methodology.
In late May, Clover Health also emerged victorious; a judge ruled that CMS had inaccurately calculated Clover’s star ratings, prompting the agency to announce a voluntary recalculation of star ratings for certain plans for 2026.
The revised evaluation increased Clover’s rating from 3.5 stars to 4.5 stars. This adjustment is significant because higher-rated plans receive bonus payments from CMS; Clover claimed that its initial star rating could have resulted in a $120 million shortfall in premiums.
Specifically, the federal judge found that CMS improperly used 20 quality measures in calculating Clover’s star ratings for 2026, relying on unauthorized data sources and ignoring required public rule-making procedures. These measures included adherence to medication guidelines and call center data.
Esteban Lopez, an associate at West Monroe’s health and life sciences division, emphasized that this was not merely a mathematical error. “The court challenged how CMS obtained its numbers, including the data sources it relied upon and its decision to include certain measures without adhering to proper notification and comment procedures. The issue revolved around CMS’s authority and legal process, not whether the underlying quality subjects were worthy of measurement,” he stated.
This case introduces a new argument distinct from previous ones about star ratings, which have generally focused on technical issues. Ari Gottlieb of A2 Strategy Corp noted, “Clover successfully presented an entirely new argument—that some measures were not permissible under the enabling law and therefore should never have been included.” This contrasts with earlier challenges that emphasized tactical elements such as data collection methodology or mathematical disputes over how CMS rounds star values.
In its communication to Medicare Advantage organizations, CMS clarified that it would only recalculate ratings if the new assessment exceeds the previously assigned rating. If the recalculated rating is lower, CMS will not update it.
Implications for Other Health Plans
While only a limited number of health plans may benefit from this recalculation, the exact impact remains uncertain, according to Gottlieb. Furthermore, the possibility of CMS appealing the Clover Health ruling still looms.
“Recalculating seemed to be the most cautious action CMS could take to mitigate the risk of facing multiple lawsuits,” he added. “The story is far from over. We do not know how it will conclude, but so far, it appears to be a significant win for Clover in terms of preserving or increasing its payment rate for 2027.”
Lopez pointed out that the plans most affected will likely be those close to certain thresholds, particularly just below four stars, where even a half-star change can significantly impact financial outcomes.
“This type of movement directly influences quality bonus payments, discounts, and the benefits that a plan can offer, as well as its competitive positioning,” Lopez noted. “It is not a windfall, and plans should temper their expectations until they conduct their own evaluations.”
Health expert Dr. Sanjay Doddamani, founder and CEO of Guidehealth, emphasized that it is too early to assess the full impact of the recalculations. However, he expects CMS to continue evolving the star rating program by eliminating measures where providers are already performing at high levels, focusing on a smaller number of critical measures, and emphasizing outcomes more heavily.
For 2027, CMS plans to remove several administrative process-focused measures, such as timely decision-making regarding appeals and access to foreign language interpreters. Doddamani cautioned that a reduced number of measures in star calculations could lead to greater variation, with each measure carrying more weight.
“Reducing the number of measures is not necessarily good or bad, but it increases the importance of adopting the right methodologies and ensuring that the measures used are meaningful, outcome-oriented, and reflective of better patient care. Health plans and providers value predictability and stability. As CMS continues to refine the program, the challenge will be to balance simplicity, outcomes, and the rigor of measures while maintaining trust in the rating system,” he explained.
Photo: Suwadee Sangsriruang, Getty Images
