Judge Upholds CMS Medicare Advantage Ratings, Humana Faces Billions in Losses

Title: Humana’s Star Rating Setback: What It Means for the Future of Medicare Advantage

A Judge’s Decision with Billion-Dollar Implications

A federal judge in Texas has upheld the Centers for Medicare & Medicaid Services’ (CMS) 2025 Medicare Advantage star ratings, affirming the agency’s authority to evaluate and score plans. The ruling delivered a sharp blow to Humana, which saw its rating fall from 4.5 stars to 3.5. That single star drop could cost the insurer billions in lost government bonus payments.

Medicare Advantage plans, the popular alternative to traditional Medicare, are scored annually by CMS. These ratings play a major role in determining the size of federal payments to insurers—higher-rated plans receive larger bonuses, helping fund enhanced benefits and lower premiums.

Humana’s Challenge and the Court’s Response

Humana argued that the CMS evaluation process was unfair, particularly objecting to a test assessing customer service for individuals with limited English proficiency. The company claimed the metric skewed its overall results and inflicted severe financial harm. However, U.S. District Judge Reed O’Connor disagreed, ruling that CMS acted within its legal authority and followed the proper procedures.

“This ruling affirms CMS’s discretion in maintaining the integrity and consistency of its evaluation methods.”
— Judge Reed O’Connor

The decision leaves Humana facing not only financial repercussions but also reputational challenges as it works to rebuild trust among consumers and investors.

The Ripple Effect on Members and Markets

The downgrade is more than just a financial hit—it could affect benefits and premiums for millions of Medicare Advantage enrollees. Roughly half of Humana’s members are covered by plans impacted by the lower star rating.

Market analysts warn that insurers facing similar situations may respond in several ways:

• Adjusting plan designs to preserve margins

• Reevaluating customer service and operational performance metrics

• Increasing premiums or reducing benefits to offset reduced funding

• Investing more aggressively in quality improvement and compliance systems

The Bigger Picture: Quality, Oversight, and Incentives

Experts note that the CMS star system, while designed to reward quality, doesn’t always perfectly reflect patient care outcomes. Instead, it measures performance across a range of operational and customer experience metrics. That means a plan’s financial health can swing dramatically based on administrative factors.

“The star ratings system has become both a compass and a pressure point for the industry—it drives improvement, but it can also distort priorities if not aligned with true care quality.”
— Health Policy Analyst, Dr. Susan Everett

This case underscores a persistent tension in the Medicare Advantage ecosystem: balancing financial incentives for insurers with public accountability and consumer protection.

Looking Ahead: A More Transparent Future

Humana’s setback may become a turning point for the industry. As CMS continues refining its evaluation framework, insurers are under mounting pressure to deliver measurable, transparent improvements. Data accuracy, patient satisfaction, and regulatory compliance will increasingly define competitive advantage in the Medicare Advantage market.

For insurers, the takeaway is clear: consistent excellence across all performance metrics isn’t just desirable—it’s essential. As the regulatory bar continues to rise, the winners will be those who view compliance not as a burden, but as a pathway to sustained trust and market leadership.