A Texas federal judge dismissed Elevance Health’s lawsuit challenging its 2025 Medicare Advantage star ratings, ruling that the company “has not shown any evidence that CMS acted arbitrarily or capriciously.”
Elevance filed its lawsuit Oct. 31, 2024, alleging that CMS’ star ratings process was “fraught with statistical variance.”
Prior to the filing, on an Oct. 17, 2024, earnings call, Elevance CEO Gail Boudreaux said the company will see fewer members in four-star and higher plans for 2025, due to one of its larger contracts missing a four-star rating by 0.0004 of a point.
In the lawsuit, Elevance Health said its overall score for one of its contracts was 3.749565 stars, leading the company to lose out on at least $375 million by narrowly missing the four-star cut off. CMS chose to round star ratings to the millionth, or sixth decimal place, a decision Elevance called “arbitrary and capricious.”
U.S. District Judge Mark Pittman said in his Aug. 18 order dismissing the lawsuit with prejudice that “it is virtually guaranteed that there will be contracts that fall a hair’s breadth short of the next-highest rating” in the star rating system.
“Understandably, Elevance would have preferred for those contracts to reach the next half-star tier,” Mr. Pittman wrote. “But the fact that they fell short does not give rise to a claim for relief under federal law.”
He said that Elevance’s case only scratched the surface of the complex process by which CMS collects data and produces star ratings.
“In other words, it is not one which a federal court is well suited to second guess,” he said. “Absent any arbitrary and capricious conduct by CMS, this court is in no position to question the outcome of the star rating system.”
Elevane did not immediately respond to a request for comment on the ruling.
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