Dive Brief:
Alignment Healthcare has won a partial victory in its legal battle against the CMS, after a court ruled that federal regulators need to recalculate the insurer’s Medicare Advantage star ratings for 2025.
Alignment sued the CMS in January, alleging that regulators erred in calculating the quality scores of some of its Arizona health plans, driving down their scores.
In June, a D.C. district court concurred that the CMS made a mistake in reviewing member appeals of coverage determinations, Alignment said on Tuesday. However, the court did not agree with Alignment’s arguments that other CMS actions, such as using a new methodology to score performance, were illegal, or that the star ratings system disadvantages smaller insurers.
Dive Insight:
The CMS scores MA plans on a scale of 1 to 5 stars based on a variety of factors. Stars are meant to serve as a measure of plan quality to help seniors compare coverage.
But over the past year, a number of insurers have turned to the courts in a bid to overturn star ratings determinations that lower their scores, given they’re directly tied to revenue in the MA program. In Alignment’s case, the insurer filed suit against the CMS earlier this year, arguing 2025 scores for some of its health plans were arbitrary and capricious.
D.C. District Judge Christopher Cooper agreed in his June ruling that the CMS did improperly factor two appeals into the rating of one of Alignment’s HMO plans, and sent the plan back to the CMS for rescoring.
After the recalculation, 100% of Alignment’s MA members are in plans rated 4 stars or above, the insurer said in its release.
It’s the latest stars victory for Alignment. The payer had the stars for one of its plans increase from 4.5 to 5 last summer after regulators recalculated the scores.
“This decision affirms the quality of care we deliver and recognizes the importance of accuracy and fairness in the Medicare Advantage Star Ratings program,” John Kao, the CEO of Alignment Healthcare, said in a statement.
However, Cooper rejected Alignment’s claims that the CMS’ use of a new methodology, called the Tukey Outer Fence Outlier Deletion Method, was arbitrary and capricious. A number of insurers have taken issue with Tukey because the tool, which is meant to identify and remove outlier data from select star-ratings measures, has made it harder to reach certain stars thresholds.
The court also threw out Alignment’s claims that CMS arbitrarily included unreliable survey data in its calculations and ignored issues stemming from having Spanish-language speakers receiving surveys in English. Alignment also attempted to argue that the CMS’ star ratings system unfairly benefits larger plans, which the judge also denied.
Alignment has appealed those denials, according to a court filing.
Alignment, which bills itself as a tech-savvy MA provider better attuned to quality and outcomes, was founded in 2013 before going public in 2021. Despite recent growth, the insurer remains notably smaller than its other publicly traded peers in the privatized Medicare program, with almost 218,000 Medicare beneficiaries in five states: Arizona, California, Nevada, North Carolina and Texas.
