Elevance loses lawsuit over Medicare Advantage star ratings

Elevance Health’s lawsuit against the Centers for Medicare and Medicaid Services over its Medicare Advantage star ratings scores has been shot down by a judge in the Northern District of Texas.

The insurer sued CMS in November, and asked the court to order the Department of Health and Human Services to recalculate its 3.75 score for a specific contract to a 4-star rating. At the time, Elevance said CMS’ calculations were "fraught with statistical variance, which can cause improper impacts on a Medicare Advantage Organization’s (MAO's) overall star rating."

CMS has cost Elevance $375 million, according to the original complaint. Star ratings represent billions of dollars in quality bonus payments, much of which are used to increase member benefits, the insurer said.

In this week’s decision, the court said CMS did not act arbitrarily, and that the court lacks the ability to question the agency’s data collection and scoring methodology, saying it’s “not one which a federal court is well suited to second guess.”

WHAT’S THE IMPACT

CMS uses 40 different measures to determine cut points that help establish star ratings from 1-5 stars. Each measure has a certain weight and then is aggregated on a weighted basis to determine a numerical score to six decimals.

Elevance said CMS rounds decimals to the millionth decimal, yet star ratings are calculated in half-star increments, so that a 3.75 numerical score should be rounded to 4 stars. 

Only seven Medicare Advantage and Part D plans received 5 stars when the Centers for Medicare and Medicaid Services released star ratings in October. This compares to 38 contracts that received 5 stars in 2024. One of the plans to receive 5 stars was HealthSun Health Plans by Elevance Health.

Many major insurers who made the 5-star list last year missed it this year, with some blaming changes in CMS methodology and others suing based on a phone call from a "secret shopper."

Humana and UnitedHealthcare have also sued CMS over star ratings.

THE LARGER TREND

During an earnings call in October, Elevance Health President and CEO Gail Boudreaux said the insurer was "considering all of our options" regarding the Centers for Medicare and Medicaid Services' 2025 Medicare Advantage and Part D Star Ratings, which saw the company take a hit in its star ratings.

Elevance improved its performance across nearly 60% of star measures, but the number of 4-star plans declined due to higher cut points, Boudreaux said.

"The entire decline in our 4-star member mix was due to one of our larger age contracts narrowly missing a 4-star rating by 0.0004. We have challenged our initial scoring with CMS and are considering all of our options," she said.