Medicare Advantage insurer Zing Health has filed a new lawsuit against HHS and CMS, alleging the agencies failed to remedy harms caused by its improper termination from the MA program last year.
The insurer filed the complaint Nov. 26 in the U.S. District Court for the District of Columbia. The lawsuit stems from CMS’s 2023 decision to terminate Zing’s Part D contract and impose sanctions barring the plan from marketing or enrolling new members over a period of six months. The termination was based on Zing receiving a 2.5-star rating for three consecutive years, falling below the required three-star threshold. Zing argued it should have received a three-star rating for 2024 under a proper application of CMS’s methodology.
In June 2024, two federal courts ruled that CMS violated the Administrative Procedure Act by using simulated cut points rather than actual prior-year cut points when calculating 2024 star ratings, finding the agency’s approach arbitrary and capricious. CMS subsequently recalculated the ratings and issued Zing a notice of retraction in June 2024, stating the plan “no longer meets the threshold for a termination or intermediate sanction.”
Zing is arguing that the recalculation to 3 stars for 2024 came too late and failed to address the full scope of damages. According to the complaint, Zing was the only Part D plan terminated and then reinstated as a result of CMS’ methodology. The company claims it suffered losses exceeding $200 million, including harm to its competitive position and reputation.
The complaint also alleges that a national pharmacy benefit manager terminated negotiations with Zing due to CMS’s actions, and the company nearly lost financing during a recapitalization effort.
The lawsuit follows an earlier lawsuit Zing filed in March 2024 challenging CMS’s star ratings methodology. A federal court dismissed that case in September, ruling that CMS’s notice of retraction did not adequately address the reputational damage the plan allegedly suffered.
