Dive Brief:
Elevance has lost a legal bid to improve its Medicare Advantage quality ratings for 2025.
On Monday, a Texas federal judge threw out the insurer’s suit and offered a biting indictment of Elevance’s legal argument, saying it relied on distorted math.
The lower star ratings will cost Elevance at least $375 million in bonus payments and rebates.
Dive Insight:
Regulators determine star ratings through a complex series of calculations to tally up dozens of metrics related to access, plan communication, patient experience and outcomes, and more. The scores, which run from one to five stars, are meant to reflect plan quality and help seniors shop between plans.
They also translate to earnings from the privatized Medicare program, which causes insurers to be highly protective of their stars. Plans that receive an overall rating of four or higher receive higher bonus payments, and higher scores also result in larger rebates if plans submit bids below the CMS’ benchmark for the coming year.
Elevance sued the HHS in October, arguing that regulators acted arbitrarily and capriciously in calculating the star ratings for five of its plans. Specifically, Elevance said that the CMS improperly adjusted some of its measure scores and didn’t follow traditional rounding rules in determining the plans’ final ratings — rounding down when it should have rounded up, resulting in a lower final score.
The CMS was within its statutory authority and followed regulations on the first count, Judge Mark Pittman of the Northern District of Texas wrote in his ruling Monday.
Pittman was more scathing on the second count, which revolved around one Elevance contract that received a 3.749565 rating. Regulators rounded the score down to 3.5. Elevance argued that it should have been rounded up to 4.
That makes no sense, as 3.749565 is closer to 3.5 than to 4, Pittman wrote.
Elevance’s argument on the rounding issue was “based on a fundamental misapplication of the rounding rules,” the judge said in his decision. The court is “at a loss” to understand Elevance’s math, with one element of it growing “more perplexing upon each reading,” Pittman said.
“Elevance’s argument appears to be tailored to reach the next Star Rating instead of anchored to the regulatory text,” the judge added, concluding later that: “CMS is correct that Elevance’s proposed method is essentially gerrymandered to give it the result it wants.”
Elevance did not respond to a request for comment, including on whether it planned to appeal the ruling. As it stands now, the current star ratings for the five disputed contracts, which range from 3 to 4 stars, will remain in place, which should cost the insurer $375 million in payments next year.
A number of insurers, including Centene, UnitedHealth and Humana, filed litigation over their 2025 stars, upset after methodology updates caused a decline in ratings.
The lawsuits, which have resulted in mixed rulings, are one strategy from managed care companies looking to preserve shaky profits in MA.
