Alignment Healthcare sued federal regulators, alleging that its 2027 Medicare Advantage star ratings were determined "in flagrant violation" of statute.
In the lawsuit filed Friday in District of Columbia federal court, the insurer says that the Centers for Medicare & Medicaid Services "has completely departed from Congress’s vision of leveraging predictable, valid measures developed with input from providers, plans, and the public" in establishing the methodology for the star ratings.
The company argues that rather than establish "consistent, stable specifications" for metrics through the traditional rulemaking process, the agency instead detailed key measures through a series of "technical notes." This violates the Administrative Procedure Act, per the lawsuit.
The program's star ratings are the critical determinant in quality bonus payments to insurers as well as a tool that aims to make it easier for enrollees and brokers to identify benefits with the highest quality.
"Consistent application of the statutory requirements governing Star Ratings is therefore essential not only to plan payments and competition, but also to ensuring that beneficiaries can rely on the Star Ratings as meaningful and comparable measures of plan quality," Alignment said in the lawsuit.
The company adds that multiple recent court decisions have set aside CMS' star ratings methodology, notably a ruling over the summer in favor of Clover Health that tossed 20 metrics used in the 2026 calculations. A Georgia federal judge determined that 10 measures utilized exceeded CMS' authority, while 10 other measures were promulgated inappropriately.
CMS recalculated the scores across the board following the ruling, but only set aside the 10 measures that the courts determined were out of the bounds of its regulatory authority. The agency maintained that approach in the 2027 calculations, Alignment argues.
"Congress created the Star Ratings program to allow Medicare Advantage beneficiaries to make informed decisions about plan enrollment based on clinically validated measures of plan quality that had been subjected to notice and comment," the company said. "CMS’s contrary approach fails to carry out the vision that Congress set forth by statute."
The Trump administration has appealed the Clover decision, so that legal case remains ongoing.
In addition, Alignment argues it suffered reputational and financial damage as a result of its 2027 scores, which plummeted compared to the prior year. Just 25% of its members are in plans with four or more stars for 2027, down from 100% in 2026.
Shares in the company tumbled following the release of the ratings, though stock prices have rebounded since.
Alignment sued the feds following the Clover decision to secure a recalculation for its scores that aligns with the court's decision, and in a statement to Fierce Healthcare, said that the lawsuit aligns with that perspecti e.
"Our lawsuit seeks to ensure that the Star Ratings program operates as Congress intended and that Alignment is properly compensated for the care we provide," Alignment said in the statement. "We respect the judicial process and will present our case in court. Because this matter involves pending litigation, we will not comment on the specific legal arguments beyond our filings."
"Our focus remains on delivering exceptional care, improving health outcomes and advocating for a stable, lawful regulatory framework that supports seniors and strengthens the Medicare Advantage program," the company said.