Dive Brief:
- Elevance Health is the latest in a parade of insurers suing the HHS over its 2025 Medicare Advantage star ratings.
- The Indianapolis-based payer filed a suit in a Texas district court last week alleging federal regulators used an “arbitrary and capricious” method to calculate the quality scores, costing Elevance at least $375 million in bonus payments and rebates.
- The suit follows litigation by other insurers — including Centene, UnitedHealth and Humana — that aim to boost their scores and protect revenue earned in the lucrative MA program.
Dive Insight:
The star ratings system aims to help Medicare beneficiaries compare the quality of MA and prescription drug plans during open enrollment. The CMS calculates the scores by assessing a range of quality measures, then assigning a score from one to five based on the plans’ performance.
Scores also have significant financial consequences for payers. Insurers that receive an overall rating of four or higher can receive higher bonus payments. Higher scores also mean payers can receive an increased rebate when they submit bids below regulators’ benchmark financial targets.
Average star ratings have declined for several years as regulators updated their methodology and pandemic-era changes expired, jeopardizing revenue insurers bring in from the privatized Medicare program. In October, the CMS said about 40% of MA plans with prescription drug coverage will earn four or more stars in 2025, compared with 42% this year and 68% in 2022.
Insurers argue the CMS is unfairly assessing the quality ratings. In Elevance’s suit, the payer alleged that the regulator’s methodology is “fraught with statistical variance, which can cause improper impacts on [a Medicare Advantage Organization’s] overall Star Rating.”
One of Elevance’s contracts received a score of 3.749565 for 2025, which was rounded down at the millionth decimal to 3.5 stars, according to the lawsuit. There isn’t a statutory or regulatory reason to round to the millionth decimal, and the plan would have been awarded four stars if the CMS had rounded to the hundredth or thousandth decimal point, the payer said.
Elevance also argued two contracts were doubly penalized when the CMS adjusted for case-mix index and the score’s reliability and distance from the national mean when calculating scores related to a consumer survey.
The suit asks the court to recalculate one plan to four stars and provide data for all of Elevance’s contracts “necessary to validate 2025 Star Ratings calculations and future Star Ratings calculations.”
The CMS said it does not comment on pending litigation. The HHS didn’t respond to requests for comment by press time.
The latest litigation isn’t Elevance’s first suit against regulators related to star ratings. This summer, the insurer notched a partial win in a case that alleged the CMS didn’t follow administrative procedure when it changed the star ratings methodology.
As a result, the agency had to largely revise ratings for this year, allowing more than 60 plans to reap higher scores.
