Zing Health Sues HHS and CMS Over Medicare Part D Termination and Ratings Dispute

Medicare Advantage insurer Zing Health has initiated a lawsuit against the U.S. Department of Health and Human Services (HHS) and the Centers for Medicare & Medicaid Services (CMS) following its termination from the Medicare Part D program in 2023. The termination resulted from Zing receiving consecutive star ratings below CMS’s three-star minimum, which led to sanctions including a marketing and enrollment ban lasting six months. Zing contends that the star rating applied to it was incorrect and that it should have qualified for a three-star rating for 2024 under CMS's methodology. In mid-2024, two federal courts ruled against CMS, determining that its use of simulated rather than actual prior-year star rating cut points violated the Administrative Procedure Act. CMS subsequently recalculated Zing’s rating, acknowledging that the plan no longer met termination thresholds and issuing a notice retracting its prior sanctions. However, Zing argues the correction was insufficient and delayed, citing damages exceeding $200 million due to reputational harm and competitive disadvantages resulting from the termination. The lawsuit also alleges that CMS's actions led to the termination of negotiations with a major pharmacy benefit manager and almost jeopardized Zing's financing during a critical recapitalization period. This legal action follows an earlier 2024 lawsuit by Zing challenging CMS’s star rating methodology, which a federal court dismissed on grounds that the retraction notice did not remedy alleged reputational damages. This case highlights ongoing tensions in Medicare Advantage program administration, particularly regarding star rating methodologies and their implications for insurer compliance and market positioning. It underscores regulatory challenges for payers navigating CMS's performance assessment metrics and enforcement procedures. The outcome could influence future CMS rating policies and insurer appeal rights within the Medicare Part D landscape.