Introduction
Overview of Medicare Advantage Star Ratings
Medicare Advantage star ratings are a crucial benchmark for both consumers and insurers. The Centers for Medicare and Medicaid Services (CMS) assigns a rating from one to five stars based on various quality measures, helping beneficiaries evaluate MA and prescription drug plans during open enrollment.
Reasons Behind Elevance Health’s Lawsuit
Allegations of Arbitrary Rating Methodology
Elevance Health contends that CMS’s methodology for calculating 2025 star ratings is “arbitrary and capricious.” The lawsuit highlights several issues, including statistical variances in the rating process that Elevance argues create undue variability in star ratings.
One key example cited is a contract score of 3.749565 for 2025, which CMS rounded down to 3.5 stars. Elevance argues that rounding to the millionth decimal is not a standard practice and unfairly penalizes their plan. According to Elevance, if the rounding had been to the hundredth or thousandth decimal, the contract would have received four stars, qualifying it for bonus payments.
Additionally, Elevance claims that two of its contracts were doubly penalized due to adjustments in case-mix index and score reliability. These adjustments, Elevance argues, have disproportionately impacted their ratings, affecting their ability to remain competitive in the Medicare Advantage market.
Financial Impact on Elevance Health
The lowered star ratings are projected to cost Elevance at least $375 million in bonus payments and rebates for 2025 alone. With insurers relying on these financial incentives to enhance plan offerings and remain competitive, the stakes are high. Elevance’s lawsuit underscores the belief that CMS’s methodology fails to provide a fair assessment, placing them at a disadvantage.
Industry-Wide Response to the Star Rating System
Elevance is not alone in challenging CMS’s rating process. Other major insurers, including Centene, UnitedHealth, and Humana, have also filed lawsuits aimed at addressing perceived flaws in the star rating system. These lawsuits highlight a growing industry-wide concern that CMS’s methodologies are inconsistent, leading to inaccurate representations of plan quality and, consequently, reduced revenues for insurers.
As average star ratings continue to decline across the Medicare Advantage program, insurers argue that CMS’s adjustments fail to reflect the true quality of care provided. In October, CMS announced that only about 40% of MA plans with drug coverage would receive four stars or higher in 2025, down from 42% in 2024 and 68% in 2022.
Implications of Declining Star Ratings
Declining star ratings carry significant implications for insurers. Plans rated four stars or higher are eligible for higher bonus payments and more substantial rebates, which allows them to offer lower premiums and enhanced benefits.
The situation presents challenges not only for insurers but also for beneficiaries who may have fewer high-quality plan options. The CMS star rating system, initially designed to reward quality, now faces scrutiny for potentially disincentivizing plans that may perform well but don’t meet the narrow criteria set by recent rating methodologies.
Elevance Health’s Requested Remedies
In its lawsuit, Elevance Health has outlined specific remedies it seeks from the court:
1.Recalculation of Star Ratings: Elevance requests that the court adjust its plan’s star ratings, specifically seeking a recalculated four-star rating for the plan rounded down to 3.5 stars.
2. Data Disclosure for Validation: The insurer has asked CMS to provide data necessary for validating its 2025 star ratings and future calculations, aiming to ensure greater transparency in the rating process.
3. Clarification of Methodology Adjustments: Elevance hopes the court will prompt it to clarify and potentially revise its methodology to prevent further arbitrary adjustments that can lead to significant revenue losses for MA plans.
Conclusion
Elevance Health’s lawsuit against HHS underscores significant concerns within the healthcare industry regarding the fairness and transparency of the Medicare Advantage star rating system. By challenging the methodology used to determine 2025 star ratings, Elevance aims to ensure accurate assessments that directly impact financial incentives, plan competitiveness, and ultimately, consumer choices. As the case unfolds, it may prompt further scrutiny and potential revisions to its rating processes, aligning them more closely with the goals of equity and accuracy. This legal move reflects a broader push among insurers for clearer and more consistent quality evaluations in Medicare Advantage programs.
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FAQs
Q1: Why is Elevance Health suing HHS?
Ans: Elevance Health is suing HHS over its 2025 Medicare Advantage star ratings, arguing that the rating methodology is arbitrary and results in lower-than-expected scores, which could cost the company $375 million in bonus payments and rebates.
Q2: What are Medicare Advantage star ratings?
Ans: Medicare Advantage star ratings are quality scores assigned to MA and prescription drug plans by CMS, based on various quality measures. These ratings impact plan bonuses, rebates, and competitiveness.
Q3: How does the star rating impact insurers financially?
Ans: Plans rated four stars or higher receive larger bonus payments and more substantial rebates, allowing them to enhance plan offerings and attract more consumers. Lower ratings reduce these financial incentives.
Q4: What specific issues does Elevance raise about the rating methodology?
Ans: Elevance claims that the CMS methodology includes statistical inconsistencies and questionable rounding practices, leading to inaccurate star ratings for some of their plans.
