Star ratings stabilizing, but health plans should be ready for changes

Medicare Advantage star ratings were released in October, and while health plans have seen ratings dip across the industry over the past three years, this year shows signs of stability despite continuing uncertainty.

Plans need to be nimble in an ever-changing environment, according to Marge Ciancetta, product manager at Cotiviti. The average plan score moved only slightly from last year – from 3.63 to 3.65 – indicating that stars are settling down.

"Forty percent of contracts are four stars or above, and most beneficiaries are in plans four stars or above as well," she said. "Market factors like high utilization, high labor costs – those things are here to stay."

Most Medicare Advantage plans fall into the average of 3.5 stars. Five stars are reserved for plans with truly outstanding performance. That, she said, is how things seem to have settled after the COVID-19 pandemic. 

This, she said, is what analysts mean when they talk about the "move to the middle." 

WHY THIS MATTERS

An upcoming change that could affect MA plan scores is the "reward factor," Ciancetta said.

This score adds bonus points to a health plan's performance rating to reward plans for high achievement. The previous reward factor model is being replaced by the Health Equity Index (HEI) for 2027, which incentivizes plans to improve care for members with social risk factors. 

Under HEI, plans can earn rewards if they meet specific enrollment thresholds for social risk factor (SRF) members and demonstrate strong performance in quality measures. The HEI reward can be added to a plan's star rating score and may help them reach the four-star threshold required for bonus payments. 

"Plans will be rewarded for supporting patients with social risk factors, but plans that don't have a lot of members with social risk factors might see their rating go down a little bit," said Ciancetta. "I do expect there'll be some drops in star ratings next year because of this change specifically."

As more changes roll out, plans will have to shore up their digital data collection.

According to Ciancetta, more measures are converting to Electronic Clinical Data Systems (ECDS), a standardized method for health plans to report quality data to organizations like the National Committee for Quality Assurance (NCQA) by using electronic clinical data from sources like EHRs, registries and case management systems. 

This method is part of a larger strategy to move from traditional, claims-based quality reporting to a more efficient "digital quality system," she said.

"It's going to be important for plans to not rely on medical record review," and find new ways to capture that data electronically, Ciancetta said.

Artificial Intelligence and the implementation of ECDS will make data collection more important, and plans will have to prove that they've done the work, Ciancetta said.

"Plans need to be smart about where they spend their money, and having good data will allow them to invest in high-ROI activities, such as member education," she said. "They need to really look at their programs and choose the right opportunities to get the most ROI.

"In general, I think we're making great strides as an industry with AI, but I don't think we're there yet," she said. "I've yet to see it revolutionize the way we do business. It still requires that human oversight."

With all of these changes afoot, health plans will have to be on their toes, Ciancetta said.

"It'll be really interesting," she said, "to see where CMS goes with these." 

THE LARGER TREND

Rule and regulatory fluidity has kept the industry on its toes, Ciancetta said.

Some of this fluidity and uncertainty stems from cut points. Insurance industry "cut points" are thresholds set by the Centers for Medicare and Medicaid Services to determine star ratings for Medicare Advantage and Part D plans. 

In the past year, CMS has made the cut points for these plans tougher, with the majority becoming more difficult to achieve, leading to a decline in star ratings of many plans. Specifically, 58% of cut points increased (got harder), 25% stayed the same, and 17% decreased, in the October release of star ratings for 2026.

The issue of cut points has made its way into federal court. In 2024 Humana sued CMS over 2025 star ratings, focusing largely on cut points. 

Cut points for several measures "moved abruptly and substantially upward, significantly depressing star ratings, including Humana's," the lawsuit said. "Under the 2024 ratings, 94% of Humana's MA enrollees were in a plan with 4 stars or higher. As a result of the unexplained swings in the most recent cut points calculated by CMS, now only 25% of its enrollees are in plans rated 4 stars and above for 2025."

Also, CMS did not follow its own ground rules on decision-making and failed to provide needed data, the complaint said.

"CMS is following the methodology they should be now so the cut points don't move," said Ciancetta.