Humana loses second lawsuit challenging Medicare Advantage star ratings

A Texas court on Tuesday struck down Humana's second lawsuit challenging Medicare Advantage star ratings released by the Centers for Medicare and Medicaid Services.

In its original lawsuit, Humana argued there were potential errors in CMS' calculations of its results and industry cut points. The company's reduction in star ratings was driven by narrowly missing higher industry cut points on a small number of measures.

This cost the company more than $1 billion in bonuses that are given to plans that score 4 stars or higher. 

In its original lawsuit, Humana said it believes a significant driver of its lower star results was one contract decreasing to a 3.5-star rating from a 4.5-star rating in 2024. 

In a decision handed down in July, the court said that at the time of filing the lawsuit, Humana "did not exhaust the administrative appeals process." Humana did appeal to CMS to improve the former's Medicare Advantage star ratings, but CMS rejected that appeal.

Humana's second lawsuit was simpler and didn't fixate on cut points, instead focusing on CMS' handling of three customer service phone calls. An Accuracy & Accessibility Study, in which CMS call "surveyors" place test calls to evaluate centers' compliance with regulatory requirements, lowered the star ratings for at least a dozen of Humana's largest plans on the basis of just three phone calls that were handled by CMS in a manner inconsistent with the agency's own regulations, Humana said. 

In the decision rejecting Humana's second lawsuit, Judge Reed O'Connor disagreed, saying the CMS' determinations on those calls were not arbitrary, and that a no-callbacks policy did not violate federal law.

Humana had argued that CMS' no-callbacks policy unfairly penalized plans whose call centers were disconnected before members could receive assistance. 

But according to the decision, "CMS reasonably concluded that consistency in call-center data collection promotes uniform measurement of plan performance," O'Connor wrote. “The agency's explanation falls well within the bounds of reasoned decision-making."

The court maintained there was nothing in the record supporting Humana's contention that CMS acted unlawfully or exceeded its statutory authority. 

"The challenged Star Ratings methodology is the product of a rational process and warrants judicial deference," the court wrote.

WHAT'S THE IMPACT 

Preliminary data from last fall showed only about 25% of Humana's members are enrolled in Medicare Advantage plans rated with 4 stars or higher, down from 94% in 2024, according to Marketwatch. As the main reason for the ratings dip, Humana cited a drop in ratings for its H5216 plan, which fell from 4.5 to 3.5 stars. The plan contains about 45% of the insurer's Medicare Advantage membership and 90% of its employer group waiver plan membership.

Humana reported a 10% revenue increase in its 2024 Q4 and full-year financial results, but that was about the only bright spot. Rising healthcare utilization and insufficient CMS rate increases have affected Humana's profitability, with shares down 50% from their 2023 peak.

Humana followed UnitedHealth Group and Elevance last fall in filing a lawsuit against CMS and HHS over the star ratings results. All of the insurers cited a change in cut points as a major reason for their plans receiving lower star ratings this year over last.

UnitedHealth won its lawsuit in late 2024. CMS appealed and then dropped the appeal.

THE LARGER TREND

Thirty-four Medicare Advantage plans earned 5 stars in the 2025 Medicare Advantage and Part D Star Ratings for 2026 released by the Centers for Medicare and Medicaid Services late Thursday.

This compares with only seven plans that received the highest rating for the 2025 plan year and 38 contracts that received 5 stars for 2024.

Star ratings affect bonus payments to MA insurers that they use to increase benefits and attract new members. Plans of 4 stars and higher earn bonuses.

The Medicare Advantage market is worth an estimated $500 billion, according to TheStreet.