Dive Brief:
- Centene is suing the federal government over its 2025 Medicare Advantage star ratings, the latest in a string of lawsuits from health insurers looking to protect their scores — and the valuable revenue they represent.
- The lawsuit filed Tuesday in a Missouri district court accuses the HHS of mishandling a “secret shopper” call meant to assess the quality of Centene’s customer call center, and unfairly including that call in the insurer’s ratings.
- Several of Centene’s plans received lower scores as a result, which could cost the insurer $73 million in revenue and cause enrollees to leave the plans — “staggering consequences” from a single call, according to the suit. Centene is requesting the judge order the CMS to recalculate its ratings without including the disputed call.
Dive Insight:
MA star ratings run from one to five stars, with one being the lowest score and five being the highest. The stars, which regulators calculate based on a bevy of underlying plan performance scores, are meant to serve as a measure of plan quality to help seniors shop between plans.
They’re also directly tied to how much the federal government pays plans for managing the care of Medicare seniors. Plans that receive four stars or higher can bid against a higher benchmark, keep more of the difference as savings and reinvest those funds into benefits, giving them a distinct competitive advantage in their markets. They also receive more generous bonuses.
The setup has long been criticized by Medicare watchdogs for driving up costs with little commensurate evidence it improves plan quality. Recently, the CMS raised the bar for reaching the highest quality scores, contributing to a slight dip in stars for 2025 across the board.
The impact on individual insurers has differed. The two largest MA insurers in the country, UnitedHealthcare and Humana, had the stars of some of their largest plans drop for next year. Both quickly lodged lawsuits against the CMS finding fault with regulators’ calculations, including how regulators assessed their call centers.
Now, Centene is joining the fray, calling the string of lawsuits “symptomatic of what appear to be systemic issues” with CMS’ secret shopper program in its complaint.
For one quality measure, government surveyors call a plan using text-to-voice technology, which is used by customers who are deaf or hard of hearing. According to Centene’s lawsuit, the surveyor’s software failed and the disputed call didn’t go through to its call center. However, the CMS still factored the call into Centene’s ratings.
As a result, seven of Centene’s plans received a lower overall star rating, while four received a lower rating for Part D prescription drug coverage, according to the complaint.
Along with missing out on higher payments, some of the plans could be penalized for not achieving at least three stars — including being branded a low performance plan or being prohibited from expanding their service areas, Centene said.
“While CMS’ mistake affected only a single call, the impact of CMS’s [sic] decision is profound,” the lawsuit reads.
Despite the suit, Centene has described its star ratings for 2025 overall as “meaningful progress” from past scores. Forty-six percent of its MA members are enrolled in plans with star ratings of 3.5 or higher next year, up from 23% this year.
Centene's star ratings improved slightly in 2025
Insurers like Centene with a large footprint in federal programs are reeling from a one-two punch this year. In MA, regulators curbing reimbursement and rising medical utilization among seniors are shrinking profit margins.
Medicare is the smallest of Centene’s three insurance segments, accounting for about 17% of the payer’s overall premiums. Though premiums remained mostly flat in the first six months of 2024 compared to the prior year, profitability is way down, with gross margins dropping 28%. In a bid to protect margins, Centene’s MA subsidiary WellCare exited six states entirely for next year.
Meanwhile, in Medicaid — the insurance scheme for low-income Americans that is Centene’s bread-and-butter, accounting for more than half of its premium revenue — insurers are struggling amid a dogged mismatch between members’ health needs and state payment rates.
Centene leadership warned investors in a July earnings call that medical costs will likely come in at the high end of guidance this year. However, the St. Louis-based payer was able to boost its full-year revenue guidance following the second quarter thanks to growth in the Affordable Care Act exchanges.
