Two more insurers sue CMS over Medicare Advantage star rating methodology
Less than two weeks after Elevance Health filed a lawsuit against the Centers for Medicare & Medicaid Services (CMS), asking a court to order the agency to recalculate star ratings for Medicare Advantage plans, two other insurers have filed similar complaints.
SCAN Health Plan and Alignment Healthcare are taking a similar line of argument to Elevance, citing Clover Health’s June victory in federal court, where a judge threw out 20 metrics used to calculate the rating of Medicare Part C plans, believing them to be varying degrees of unclear or arbitrary.
This forced CMS to recalculate Clover Health’s star ratings, promising to only alter the ratings if the new calculator resulted in more stars.
The system to rate the quality of Medicare Advantage plans is simple for consumers—the more stars, the better an option is supposed to be in terms of reimbursement speed, coverage options, customer service and more—but as Clover Health’s victory shows, the system is complicated for payers.
As Elevance pointed out in its complaint, the half-star reduction it received—allegedly as a result of the old methodology CMS can no longer use—equates to a loss of $115 million in incentive payments, which healthcare payers that participate in privatized Medicare earn based on the star ratings of their plans.
Clover Health earned a half-star bump to its plans once CMS re-did the math, and Elevance, SCAN and Alignment are wondering why they’re not also getting the same re-evaluation. Further, in their separate-but-related lawsuits, the companies all argue that such a recalculation is effectively required as part of the June decision in favor of Clover, if CMS is complying with the spirit of the ruling compelling the agency to evaluate plans with consistency.
As a result of the reduced ratings, SCAN claims to be missing out on $125 million in bonus payments, and Alignment said it stands to lose $50 million.
In all three cases, the insurers said they have tried to rectify the issue with CMS directly, resulting in the agency refusing to vacate the 2026 star ratings on their respective plans. Further, it is alleged CMS also opted not to recalculate the grades, despite doing it for Clover.
SCAN and Alignment argue this is a de facto violation of the Administrative Procedure Act, as CMS is effectively regulating by decree, in a manner that would typically require a bill to be passed through Congress.
“The star ratings program went off the rails years ago,” SCAN wrote in its complaint. “The system is undeniably broken.”
Both SCAN and Alignment are represented by the same law firm, Latham & Watkins. It’s unclear if all of the above lawsuits will end up being consolidated in some form, given the similar nature of the requests in each.
Ten ways to earn a star
As for the 20 metrics, 10 of the metrics the court allowed CMS to keep in the future, albeit with some tweaking. However, all 20 were not allowed to be applied to Clover Health’s Medicare Advantage plans during the re-do of the star ratings.
However, SCAN and Alignment note that the salvaged 10 metrics are being deemed valid on their plans, meaning that even if CMS recalculated, ratings may not change. They’re asking a court to compel the agency to apply the Clover methodology to all star ratings.
This is a developing story.
Chad is an award-winning writer and editor with over 15 years of experience working in media. He has a decade-long professional background in healthcare, working as a writer and in public relations.