On October 31, Elevance Health filed suit against the U.S. Department of Health and Human Services (HHS) and the Centers for Medicare & Medicaid Services (CMS) to challenge the 2025 Star Ratings system used for Medicare Advantage and Part D plans. CMS published the final Star Ratings to the public on October 10 through the Medicare Plan Finder.
The Star Ratings are intended to be used by Medicare beneficiaries, brokers, and agents to identify the highest quality plans. Plans with higher Star Ratings have an advantage in enrolling beneficiaries. Additionally, although a set rate is paid for each person enrolled in a Medicare Advantage plan, high scores trigger additional bonuses and rebates.
As part of the Star Ratings system, CMS evaluates the quality and performance of each Medicare Advantage Organization (MAO) compared to other MAOs. To calculate the Star Ratings, CMS measures each MAO’s performance on about 40 different quality and performance measures to determine a numerical score for each MAO. Up to five Stars are assigned for each measure; all Stars are aggregated on a weighted basis to calculate the MAO’s overall score to six decimal places; and CMS then assigns the MAO a Star Rating of 1 (lowest) through 5 (highest) using half-Star increments.
Among other things, Elevance claims that CMS improperly calculates overall Star Ratings by rounding to the millionth decimal place because there is no statutory or regulatory basis for doing so and that such a methodology is arbitrary and capricious because there is inherent unreliability and statistical variance in the data used and the underlying calculations. More specifically, Elevance claims that arbitrarily rounding its Star Rating to the millionth decimal place caused it to miss a 4-Star Rating; as a result, Elevance alleges that it has sustained damages totaling $375 million in the form of lost quality bonus payments and rebate retention.
Elevance also claims that CMS has failed to disclose certain data that prevents it from validating that CMS calculated the measure scores and overall Star Ratings correctly.
In recent weeks, large insurers including Humana, Centene and subsidiaries of UnitedHealthcare have also filed suit against HHS and CMS challenging the 2025 Star Rating system. Rivkin Radler will continue to monitor developments as these cases progress.
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