Lawsuits Challenge CMS on Medicare Advantage Star Ratings
Recently, SCAN Health Plan and Alignment Healthcare filed lawsuits against the Centers for Medicare & Medicaid Services (CMS) over the agency's refusal to uniformly adjust Medicare Advantage (MA) quality scores using the methodology applied in Clover Health's case. This legal action highlights a growing trend of insurers seeking judicial intervention to influence their MA star ratings. It follows a recent court decision that subjected CMS’s practices to legal scrutiny.
The lawsuits, filed in the District of Columbia district court, argue that SCAN and Alignment were unjustly denied higher star ratings due to CMS's selective application of quality metrics. In June, CMS recalibrated Clover Health’s star ratings after a legal defeat revealed that 20 measures were improperly factored into Clover’s 2026 calculations. However, CMS applied 10 of these measures to other insurers, prompting the current disputes.
Consequently, organizations like Elevance Health, SCAN, and Alignment have filed separate complaints, citing significant financial impacts. Elevance reports a $115 million loss, while SCAN and Alignment face financial setbacks of $125 million and $50 million, respectively, due to CMS's recalibration method. These insurers argue CMS's refusal to reassess their ratings violates the Administrative Procedure Act.
The insurers advocate for judicial intervention to overturn their 2026 star ratings, urging CMS to reassess them without the disputed metrics. Broader concerns about the MA star ratings system persist, with critics suggesting potential misaligned financial incentives and overpayments. Analysts, including those from the Medicare Payment Advisory Commission (MedPAC), recommend overhauling the system to enhance plan quality and efficacy.
Amidst these proceedings, CMS faces scrutiny regarding its role in MA plans' payment mechanisms, with calls for structural reforms to address systemic inefficiencies. Latham & Watkins, representing the involved insurers, supports these reform calls, emphasizing the need for a comprehensive review of the star ratings mechanism to ensure equitable treatment throughout the industry.