A recent court ruling in favor of Clover Health is leading the feds to recalculate Medicare Advantage's star ratings for 2026, and analysts at Capstone warn that this "foreshadows [a] volatile direction" for the program.
In late May, a federal judge determined that the Centers for Medicare & Medicaid Services improperly used 20 metrics in calculating Clover Health's 2026 scores in the star ratings. In an analysis from the law firm Crowell & Moring, the court's decision has sweeping implications, as 10 of the measures should have been included after a notice-and-comment period.
Because the agency did not undertake the appropriate rulemaking process, the courts determined that those measures were used unlawfully, according to the analysis.
"While the scope of the court’s decision is explicitly limited to rectifying Clover’s 2026 Star Rating, the implications for the broader industry are likely unavoidable," per Crowell. "Notably, the court’s findings regarding the statutory data limitations are not procedural and cannot be resolved through rulemaking alone; CMS may need Congress’s support in adjusting applicable laws."
Multiple payers have engaged in legal battles with CMS over the calculations for the star ratings across the past several years, with varying degrees of success. UnitedHealthcare and Centene have scored court wins on call center-related metrics, while Humana lost a legal challenge in this arena.
SCAN Health Plan also won a star ratings lawsuit challenging CMS' Tukey outlier methodology, which deletes outlier contracts from the star ratings calculations.
In a notice last week, CMS said it would recalculate scores for MA plans based on the ruling, and would only change scores if it would increase a plan's rating, Capstone noted.
Insurers that see their scores increased would be able to resubmit bids for the 2027 plan year.
In a previous analysis of the ruling, Capstone's analysts said that the ruling does generally align with the Trump administration's goal of streamlining the star ratings program. The new report said that the notice further underlines that perspective.
"Capstone believes CMS’ decision to utilize the court’s ruling in recalculating Star Ratings measures is in line with Trump administration goals of reforming the Star Ratings system," the analysts wrote.
The analysts believe that CMS will still likely challenge the ruling due to the court's perspective on notice and comment requirements for the star ratings specifically, but also expects the agency continue to reduce the measures used to calculate scores to align with the Universal Foundation, a collection of 10 measures from the drawn from Healthcare Effectiveness Data and Information Set (HEDIS) and Consumer Assessment of Healthcare Providers and Systems (CAHPS) datasets.
Plans had until Monday to let CMS know whether they wanted to resubmit bids for 2027 based on recalculated scores, and will have until June 29 to submit a new submission. However, Capstone noted that for many of the largest plans, recalculating the scores may have a negative impact.
For instance, based on the new methodology, the 2026 star rating in UnitedHealthcare's largest contract would likely decline from a 4.5 score to a 4.0 score. Capstone projected a similar decline for Aetna's largest contract if the insurer chose to recalculate scores.
And a recalculation would likely not move the needle at all for Humana's largest MA contract, per Capstone.
In its previous report, Capstone estimated that a recalculation would lower average scores across these payers, as well as for Elevance Health, while leading to a significant increase for Clover Health specifically. The analysts also said that the ruling could trigger litigation from other payers on similar grounds.
"The situation remains in flux, with a number of potential outcomes depending on CMS’s choice to appeal the decision and whether payers will initiate legal action," they wrote.