Elevance Sues HHS Over Medicare Advantage Star Ratings

Dive Brief:

• Elevance Health is suing the federal government over changes to how regulators calculate Medicare Advantage star ratings that are set to cost the insurer hundreds of millions of dollars in quality bonus revenue.
• The CMS implemented a controversial change to how it calculates MA stars, a key measure of plan quality that determines payer bonuses, for 2024. As a result, stars for some insurers — including Elevance — plummeted.
• Elevance and its regional subsidiaries slammed the changes as illegal in the suit, which was filed late December in a Washington, D.C. district court. In particular, Elevance highlighted a technical methodology adjustment that insurers have taken issue with before in asking the government to undo the changes and recalculate star ratings for 2024.

Dive Insight:

In MA, plans receive an annual rating on a scale of one to five stars. CMS calculates the rating based on a plan’s performance in dozens of categories including member satisfaction, medication adherence and preventative screenings.

Star ratings have a huge impact on the operational and financial health of a plan, as they determine whether a plan receives a bonus, and a plan’s ability to bid against a higher benchmark rate for the following year.

Star ratings swelled during the coronavirus pandemic due to COVID-19 disaster relief provisions. But in 2022, the CMS took steps to pare back what it viewed as overinflated scores. As a result, fewer plans reached the four-star threshold for bonuses in 2024: 42%, compared to 51% of contracts in 2023.

Indianapolis, Indiana-based Elevance suffered one of the largest declines in its ratings. Just 34% of its plans had four or more stars in 2024, down from over 64% in 2023.

As a result, Elevance expects its quality bonus payments to fall by $500 million, executives said in October.

Now, Elevance is taking aim at the federal government to try and prevent that loss.

The new suit, filed against HHS Secretary Xavier Becerra and CMS Administrator Chiquita Brooks-LaSure, says regulators’ star ratings changes are “arbitrary and capricious” and violate the Administrative Procedure Act.

Specifically, Elevance is taking issue with the government’s use of a novel method to stabilize star ratings overall. Regulators use that method, known as “Tukey,” to identify and delete outlier contracts.

The CMS notified insurers in 2020 that it would be using Tukey to calculate stars for the 2024 plan year, but the change was not included in 2022’s rules. The CMS then reinserted language about Tukey in 2023, saying it had been “inadvertently removed” the year before.

The resurrection of Tukey is problematic due to how the CMS determines how star ratings apply across plans for specific measures, Elevance argues. Regulators aren’t allowed to change that measure, called “cut points,” more than five percentage points compared to the prior year. Yet, in calculating 2024’s star ratings, the CMS applied Tukey for the first time, and compared the resulting ratings to what 2023’s ratings would have been had Tukey been used that year as well — not to 2023’s actual ratings.

As a result, 2024’s ratings fell much more sharply than should have been allowed under the five-point guardrail, Elevance argues.

“Instead of ensuring stability and predictability of cut points from one year to the next, CMS achieved the exact opposite result,” the lawsuit says. “Indeed, CMS’s violation of the guardrails requirement had a significant impact on Star Ratings across the industry by causing overall Star Ratings to drop significantly.”

Elevance also accused the government of robbing it of $190 million in bonuses over a dropped phone call to its call center “through no fault” of Elevance’s, the lawsuit says.

Star ratings have long been a source of controversy, with insurers and the government at loggerheads over the size of bonuses, which totaled at least $12.8 billion last year — a record high, according to the KFF.

Meanwhile, some research suggests star ratings do not actually measure plan quality, while putting more financial stress on Medicare as the public insurance program limps toward insolvency.

The issues with star ratings mirror other recent complaints from insurers about regulatory changes to MA as the program continues to grow in popularity among Medicare-age seniors. Humana, which brings in the lion’s share of its revenue from MA, sued the government last year over risk adjustment audits meant to curb overpayments.

Elevance operates health plans in 22 states and Puerto Rico, and covers 2.9 million Medicare beneficiaries in MA and prescription drug plans.