Medicare Advantage insurers could see their star ratings fall next year — and lose out on the lucrative bonuses the ratings represent — after regulators boosted many of the thresholds for achieving the quality scores.
Earlier this week, the CMS released draft cutpoints, the thresholds the agency uses to convert MA plans’ quality and performance scores into a 1 to 5 star rating, as part of the preview process before regulators announce official results in early October.
About 50% of cutpoints got harder, 33% were unchanged and 17% actually got easier, according to analysis by the Newton Smith Group, an MA consultancy.
Healthcare Dive also reviewed the draft technical notes, which include the cutpoint data and are not yet publicly available.
Half of the cutpoints tightening doesn’t mean the CMS is purposefully making things harder for insurers. The cutpoints are based on the relative performance of plans participating in the privatized Medicare program, so the industry improving performance automatically shifts the thresholds up.
Still, tougher cutpoints don’t bode well for most plans — a worrying sign for the market, given the volume of money at stake as insurers hustle to resuscitate MA earnings. Changes in star ratings can have significant implications on payment, as even a single half-star change can equate to hundreds of millions of dollars for a plan.
“The average payer leader should be very worried. Very worried,” said Melissa Newton Smith, the founder of the NSG. “There are very few tailwinds sitting in stars right now.”
The 2027 stars grading sheet
Insurers jockey aggressively for higher stars, which are tied directly to lucrative bonuses and competitive advantages in the MA program. It’s particularly important to payers that their MA contracts reach the 4-star cutoff, given that it translates to higher bonus payments. Higher scores also result in larger rebates if plans submit bids below the CMS’ benchmark for the coming year.
But stars have become a boogeyman for many MA participants. The scores fell coming out of the coronavirus pandemic, after disaster relief provisions sunset, regulators carved out outliers that skewed stars calculations and industry-wide improvements boosted cutpoints, making the vaunted 4-star threshold harder to reach. The trend sparked a raft of lawsuits from insurers upset about their stars.
After a few consecutive years of declines, average MA star ratings for 2026 were essentially flat. But there’s been significant uncertainty as to where stars will land for 2027, especially given recent legal turmoil over how the CMS calculates scores.
Now, market watchers have an important clue into how insurers could fare: the CMS’ grading sheet for next year.
About half of cutpoints got harder, mostly in Healthcare Effectiveness Data and Information Set, or HEDIS, measures, according to the NSG analysis.
HEDIS includes 90 metrics across six domains used to rate plan quality and performance, including accessibility and effectiveness of care.
Many of the HEDIS thresholds are rising as plans invest more in data collection, making it easier for them to track members’ health and incentivize better outcomes, Newton Smith said. That’s making it harder for insurers without good data capabilities to keep up.
For example, Kidney Health Evaluation for Patients with Diabetes rose by 7 to 10 points, depending on the stars threshold, for 2027; while Colorectal Cancer Screening tightened by 4 to 11 points.
One-third of cutpoints didn’t change, mostly due to Consumer Assessment of Healthcare Providers & Systems, or CAHPS, cutpoints mostly remaining the same, the NSG found. CAHPS measures patient experience with their health plan.
Newton Smith said the stagnancy was surprising. “Every indicator outside of CAHPS itself indicate that consumers and their doctors are very dissatisfied with Medicare Advantage plans,” she said, citing surveys finding plummeting patient sentiment toward MA, more providers terminating MA contracts and the impact of plans exiting markets and cutting benefits to stay profitable in 2026.
“The mechanics of the CAHPs survey process may by design be masking those very real frustrations that we know are undeniable,” Newton Smith said. “Once we see contract-specific data, we’ll know more.”
About 17% of cutpoints got easier. The CMS also removed three measures for 2027 dealing with pain assessment in older adults, medication reconciliation after a hospital discharge and medication therapy management reviews, as expected from prior rulemaking.
UnitedHealthcare could face pressure
It’s impossible to know the impact on specific insurers until the CMS releases final stars information in early October. The cutpoints themselves aren’t necessarily final, given plans could still flag potential errors to the CMS, though the thresholds generally don’t change between the preview and the final publication, according to MA experts.
But after applying national publicly traded insurers’ performance last year to the new cutpoints, UnitedHealthcare — the largest MA insurer in the U.S. — looks the most challenged, according to Whit Mayo, an analyst with Leerink Partners.
If the insurer hasn’t improved its performance, UnitedHealthcare would see its raw scores drop across 9 of its 10 largest contracts, and its largest contract would slip from a 4.5 to a 4, Mayo said in a Wednesday note.
Stars for Humana, the second-largest MA insurer, would remain roughly the same, according to the analyst.
Still, executives in recent earnings calls and investor conferences have touted improvements in their stars performance, which could translate to better 2027 results.
On Tuesday, UnitedHealth CFO Wayne DeVeydt said during Wells Fargo’s healthcare conference that the company has improved across 10 of 12 HEDIS measures, though CAHPS performance dropped as expected following benefits cuts.
Meanwhile, Humana in July shared data showing that it’s improving faster than the industry average for 11 of 12 HEDIS measures.
The Kentucky-based payer could particularly benefit from a stars turnaround, after its percentage of MA seniors in plans rated 4 stars or higher dropped from 94% in 2024 to 25% in 2025, costing Humana an estimated $1 billion or more.
The figure slid again to 20% in 2026, though Humana has said it expects its stars to be “meaningfully higher” next year.
Stars are key for insurers looking to boost their MA profits, which have flagged over the past two years as seniors utilized more (and more expensive) medical care than expected and policy changes from Washington dampened reimbursement.
Insurers displeased with their final 2027 stars could have a legal avenue to sue, given the CMS used a methodology tossed out by a federal court earlier this year to calculate the scores.
In May, a judge ruled the methodology included illegal metrics, forcing the CMS to recalculate stars for the MA plaintiff, Clover Health. The agency appealed that decision, though it also elected to rerun scores for the rest of the industry in the meantime — eschewing some, but not all, of the contested measures.
For 2027, the CMS used the same methodology that Clover disputed in the first place, according to Newton Smith. The ping-ponging methodological changes have destabilized stars, and could fuel future litigation.
“We very well might see a wave of lawsuits,” Newton Smith said. “To say this is a volatile year would be an understatement.”
Watchdogs have become increasingly concerned about the star ratings program, especially in light of research that the program doesn’t lead to any improvements in plan quality and could be contributing to snowballing taxpayer spending on MA.
CMS paid out at least $12.7 billion in bonuses last year, according to estimates from the health policy research group KFF.
Insurers are also increasingly displeased with the star ratings status quo, though for different reasons. MA organizations argue the program is overly complex, includes unnecessary metrics and that shifting goalposts from year to year make it difficult to succeed.
The star ratings program is one facet of a larger controversy around MA, with critics concerned that insurers are gaming the program’s financing system and receiving inflated payment from Medicare. The federal government will pay an estimated $76 billion more to cover MA seniors this year than it would if those same seniors were in traditional Medicare, according to a congressional advisory group.
Still, the MA industry maintains that the coverage is cheaper for seniors than traditional Medicare, offers more varied benefits and spurs better health outcomes. And it’s remained popular: More than 35 million people are enrolled in MA, representing more than half of all eligible Medicare beneficiaries.
