Dive Brief:
- The federal government plans to sanction Elevance — including by preventing its Medicare Advantage plans from enrolling any new members — for failing to comply with federal data submission requirements, in a rare and serious threat to the company’s finances.
- Over the past seven years, Elevance failed to submit data backing up its members’ risk adjustment scores through the CMS’ electronic systems, according to the CMS’ notice to the plan in late February. The insurer instead submitted this information via flash drives, despite the CMS repeatedly warning against that method.
- The sanctions will kick in March 31 and remain in effect until Elevance corrects its “substantial and persistent” noncompliance, the CMS said. Elevance stock fell 9% over Monday’s trade after the insurer disclosed the sanctions in a securities filing.
Dive Insight:
In MA, the government pays private insurers a per-member, per-month fee for covering the care of Medicare seniors. That fee is adjusted up or down depending on the sickness of those seniors, which is represented through a member’s risk adjustment score. The sicker a member, the higher their score, and the more an insurer is paid.
As such, insurers are incentivized to inflate risk adjustment for their members, a practice that spurs tens of billions of dollars in estimated overpayments each year.
Federal regulators have tried to clamp down on this practice, called upcoding. The Biden administration restructured how MA plans score their members’ health needs to try to make risk adjustment more accurate, which has cut into the profits of major MA carriers like UnitedHealthcare. Meanwhile, the second Trump administration has proved more interested than many Washington watchers expected in cracking down on insurer gaming in MA, proposing additional guardrails around the risk adjustment process.
Now, the CMS is issuing new sanctions on Elevance for failing to correct or submit diagnosis codes backing up its members’ risk adjustment scores through the CMS’ own systems. Instead, Elevance sent that information via encrypted external USB flash drives, creating auditing and data integrity risks, according to the CMS’ notice.
Moreover, Elevance requested that the CMS not claw back funds associated with the unsupported diagnosis codes, against government regulations, the CMS said.
In its securities filing on Monday, Elevance argued it revised its practices in April 2023 after the CMS issued additional regulatory guidance. But the company was noncompliant as recently as October 2025, according to the CMS.
“The potential financial impact of these unsupported diagnoses is substantial and ongoing. Elevance’s knowledge regarding unverified diagnosis codes, combined with its failure to correct this data through required systems and its continued inaccurate certifications of data accuracy, constitutes substantial failure to carry out its contracts with CMS,” federal regulators wrote to the company.
Starting March 31, the CMS will prevent Elevance’s MA plans from enrolling any new members. The agency is also suspending certain communication activities to Medicare beneficiaries, though neither CMS’ notice nor Elevance’s securities filing specified how.
The sanctions will remain in place until Elevance submits data corrections for potentially unverified diagnosis codes through the CMS’ official systems, and makes sure diagnosis codes that aren’t supported by medical records are properly corrected moving forward.
Cigna faced similar sanctions in 2016, which caused the insurer to lose 14% of its MA members the following year — likely from damaging Cigna’s brand with the agents and brokers who help seniors sign up for plans, according to Leerink analyst Whit Mayo.
Similarly, “we view this as primarily a short-term reputational hit to [Elevance], with membership likely being impacted next year depending on the duration of the suspension. Since [Elevance] is already intending to lose membership in 2026, incremental losses next year are probably manageable,” Mayo wrote in a note Monday.
Elevance already aimed to trim its MA membership this year in a bid to bolster flagging margins in the privatized Medicare program. Like many of its peers, Elevance exited unprofitable markets and steered seniors towards plans where it can more aggressively control costs for 2026.
Based on outcomes from the annual open enrollment period, those actions seem to have been successful — Elevance dropped about 14% of its MA members in 2026 compared to 2025, enrolling 1.9 million seniors in the program.
Still, the sanctions could make it harder for Elevance to return to membership growth in the future, if any reputational damage with brokers proves sticky, Mayo said.
Elevance does have an opportunity to avoid the sanctions altogether, by submitting correct overpayment reports for the years in question by March 30, according to the CMS’ notice.
“The Company is engaging with CMS regarding the matters raised in the notice and is committed to working cooperatively with CMS to address its stated concerns,” Elevance said in its filing.
