Humana and Other Health Insurers Challenge CMS Over Medicare Advantage Star Ratings

Humana and Others Challenging CMS's

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In a surprising move, Humana has initiated a lawsuit against the Centers for Medicare and Medicaid Services (CMS), disputing the 2025 Medicare Advantage and Part D Star Ratings. This legal action is the latest in a growing trend where major health insurers, feeling the impact of recent regulatory changes, are fighting back to protect their competitive edge in the Medicare market. UnitedHealth has already filed a similar lawsuit, and Elevance is considering its options, signaling a broad concern across the industry.

The Heart of the Issue: Medicare Advantage Star Ratings

The crux of Humana’s lawsuit, filed in federal court in Texas on October 18, revolves around changes to the "cut points"—the thresholds that determine a Medicare plan’s star rating, which ranges from one to five stars. These star ratings play a pivotal role in the Medicare Advantage (MA) landscape, offering both consumers and professionals a quick way to assess the quality of various plans. Higher star ratings translate not only to reputational benefits but also to substantial financial bonuses from the federal government. These funds can lower costs for enrollees or be used to enhance plan benefits.

Humana’s contention is that CMS failed to adhere to its own established guidelines during the ratings calculation. According to Humana’s complaint, CMS did not disclose necessary data to validate these critical cut points, leading to a precipitous drop in their star ratings for 2025. In 2024, 94% of Humana’s Medicare Advantage members were in plans with a 4.0-star rating or higher. For 2025, this figure has plummeted to just 25%, a decrease Humana attributes to unexplained and abrupt changes in the scoring thresholds.

Billions of Dollars at Stake

The stakes are extraordinarily high. Medicare Advantage has grown into a massive public benefit program, now exceeding traditional Medicare in enrollment. Humana’s drop in star ratings could result in a revenue loss of between $1 billion and $3 billion in 2026, analysts estimate. This drop doesn't just affect Humana's bottom line—it influences the competitive landscape, with star ratings directly impacting the bidding process for future contracts and membership growth.

Moreover, Humana claims that the data used to calculate these ratings was not handled appropriately. A key grievance involves an Accuracy & Accessibility Study, in which CMS conducted just three phone call tests that impacted the ratings of several major Humana plans. Humana argues that these tests were not conducted according to CMS’s own regulations, unfairly reducing their ratings.

A Wider Trend: Health Insurers Pushing Back

Humana's lawsuit is not an isolated incident. Other insurers are also pushing back against CMS, as the recent adjustments to star rating metrics have affected the entire industry. For instance, UnitedHealth's lawsuit centers on a single customer support call that it claims unfairly lowered its scores. The sentiment across the industry is clear: the adjustments to the star rating criteria have caused confusion and have significantly impacted financial performance.

The star ratings, initially designed to give consumers a transparent view of plan quality, are now seen by some in the industry as tools that could be subject to fluctuating regulatory standards. This lack of predictability, as Humana asserts, undermines the trust insurers have in the CMS's rating system.

The Broader Implications for Medicare Advantage

The tension between CMS and health insurers comes at a critical juncture. Only seven plans received a perfect 5-star rating for 2025, down from 38 in the previous year. This sharp decline indicates that the bar for achieving high ratings has risen, catching insurers off guard and leading to a series of lawsuits.

The impact is particularly severe for Humana. With its average star rating falling from 4.37 in 2024 to 3.63 for 2025, Humana has seen a dramatic decrease in its share price, losing almost half its value over the past year. Alongside regulatory challenges, rising healthcare costs are compounding the difficulties for insurers, as seniors in Medicare Advantage plans increasingly require more medical care than anticipated.

What’s Next?

Humana is asking the court to invalidate the 2025 ratings and force a recalculation, similar to a previous case involving SCAN Health Plan, where CMS had to retract and recalculate ratings mid-contract year. This litigation not only seeks to correct the perceived errors but also sets the stage for how future star ratings might be evaluated.

The outcome of this lawsuit could have lasting implications for the industry, especially as Medicare Advantage plans continue to grow in popularity. The stakes are not only financial but also reputational, with the industry's credibility hanging in the balance. A court ruling in favor of Humana could potentially lead to more transparency in the rating process and better checks and balances for future evaluations.

As this legal battle unfolds, it underscores the broader challenges within the Medicare Advantage market—where regulatory changes, financial incentives, and rising medical costs are leading to significant shifts in strategy and competition. Keep an eye on this evolving situation; it could reshape how health plans are rated and influence the options available to Medicare beneficiaries in the years to come.

This ongoing case is just one of many stories shaping the Medicare Advantage landscape. Stay tuned for more updates and insights on our website, where we break down complex issues into clear, actionable information.

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