Dive Brief:
The CMS has denied Humana’s internal appeal to improve the insurer’s Medicare Advantage bonus ratings, Humana disclosed in a filing on Tuesday in its ongoing litigation against the government for allegedly arbitrarily calculating the scores.
The CMS’ decision is subject to review by new CMS Administrator Dr. Mehmet Oz before it becomes final on April 28, according to the filing.
If finalized, the decision could cost Humana billions of dollars in revenue next year.
Dive Insight:
Humana sued the HHS in a Texas district court last fall after regulators in the Biden administration tweaked how star ratings are calculated.
The changes had a mild effect on star ratings overall, but walloped Humana: the payer’s average star rating (this links to a survey about the dental industry) fell from 4.37 in 2024 to 3.63 in 2025 — the largest drop of any major MA insurer, according to an analysis by HealthScape, a subsidiary of healthcare consultancy Chartis.
Analysts estimate that Humana could lose $1 billion to $3 billion in 2026 as a result, given that the star ratings give plans a competitive advantage in bidding and are tied to generous bonuses from the federal government.
Humana’s suit is one of many from insurers displeased with changes to their star ratings. Late last year, the CMS revised ratings for some insurers that had filed suit, including UnitedHealth and Centene. However, regulators didn’t change Humana’s scores.
Now, the CMS has rejected Humana’s internal appeal to improve its stars. The development throws a wrench in CMS’ arguments that the Texas court should throw out Humana’s case because the insurer hadn’t exhausted administrative options, Humana said in its filing.
The CMS argument is unfair, according to Humana, given internal appeals are to contest potential calculation errors or data mistakes and Humana’s lawsuit contests the underpinning rules and methodology used to determine star ratings. But either way, that argument will soon be moot, given the looming deadline of April 28 for the internal appeal to be settled, Humana said.
“Time remains of the essence, and plaintiffs respectfully request entry of final judgment no later than April 30, 2025,” Humana’s filing reads.
As the second-largest MA insurer in the country, Humana has been hit particularly hard by rising utilization costs for members that’s outpaced reimbursement in the privatized Medicare program. The insurer reported a profit of $1.2 billion in 2024, down more than half from the $2.5 billion in profit it reported in 2023.
However, the CMS recently finalized MA rates for next year significantly higher than the industry was expecting, which should be a boon for insurers like Humana looking to boost their MA margins.
