Elevance Health and its insurance subsidiaries are suing HHS for "unlawful, and arbitrary and capricious" methodology changes to how Medicare Advantage and Part D star ratings are calculated.
Using a system of 40 quality and performance measures, Medicare Advantage plans must receive star ratings of four or higher to earn quality bonus payments from CMS. The overall average MA star rating declined slightly in 2024, to an average of 4.04.
In October, Elevance said it is expecting to lose around $500 million in revenue in 2025 as a result of declining star ratings. CEO Gail Boudreaux told investors some of the decline was because of recent changes in CMS' methodology for calculating star ratings. The percentage of Elevance members enrolled in contracts rated at four stars or higher declined from 64% in 2023 to 34% in 2024.
The lawsuit, filed Dec. 29 in Washington, D.C., is focused on the "Tukey" method, a change announced by CMS in a 2020 final rule and implemented in 2024 star ratings. Through the new method, CMS removed extreme outliers from measure scores to prevent outliers from affecting all MA contracts, thereby making it more difficult for plans to earn a high star rating. In 2022, a final star ratings rule from CMS did not mention the new change, which the agency added back in the 2023 rule, citing an inadvertent removal.
CMS limits scoring changes to 5% annually. In the lawsuit, Elevance says CMS should have factored in those limits before adding the Tukey change back in 2023 versus the other way around.
"Despite that unambiguous and clear regulatory obligation, CMS set cut points for 2024 star ratings that exceed the 5% guardrail — causing a dramatic downward shift in star ratings across the industry and with respect to [Elevance] specifically," the lawsuit says.
Elevance also noted another issue with a specific measure used to evaluate a plan's accessibility by using "secret shopper" callers to call plans directly. Elevance alleges CMS incorrectly concluded that the payer missed a single phone call at a call center, despite "evidence that the call never even connected to [Elevance's] phone lines through no fault of [Elevance]." The lawsuit claims Elevance lost $190 million in bonus payments because of the missed call.
Elevance is asking the court to declare that CMS incorrectly calculated Medicare Advantage star ratings for 2024, and require the agency to recalculate scores and redetermine bonus payments.