Alignment sues CMS over 2027 Medicare Advantage star ratings crash

An article from

Dive Brief:

• Alignment Healthcare is suing the CMS in a bid to overturn a disastrous drop in its Medicare Advantage quality scores for 2027 and retain the hundreds of millions of dollars in payments they represent.
• On Friday — one day after the CMS disclosed the star ratings, including significantly poorer results for Alignment — the California-based insurer filed a complaint in D.C. district court arguing that the agency’s stars methodology is illegal because it wasn’t promulgated through the rulemaking process.
• Alignment is asking the court to vacate its 2027 star ratings and force regulators to recalculate them using a more favorable methodology in advance of the Medicare selling season for 2028.

Dive Insight:

Alignment’s lawsuit is unsurprising. The insurer, which covers roughly 240,000 members in five states, threatened to sue after the percentage of its members in plans rated at least 4 stars fell from 98% in 2026 to 25% in 2027.

The drop is set to cost Alignment more than $200 million in payments in 2028, the year affected by the stars, according to Friday’s complaint.

Alignment’s lawsuit could precede more suits from insurers upset with their quality scores, which run from 1 to 5 stars and impact bonuses and competitive advantages in the privatized Medicare program. The CMS has recalculated ratings for at least one insurer in each of the past three years, after insurers have cinched victories in the courts arguing that the agency is playing fast and loose with stars calculations.

Most recently, a Georgia court this spring took issue with 20 of the CMS’ star ratings measures, ruling that 10 fell outside the agency’s statutory authority to adopt and 10 were procedurally invalid because they weren’t implemented through regulation.

In June, the CMS recalculated 2026 star ratings for MA insurers without the first 10 measures, but didn’t withdraw the second 10 for any insurer except Clover Health, the plaintiff in the suit. That decision opened regulators up to legal challenges, and was quickly followed by lawsuits from Alignment and two other health plans looking to improve their scores. Those cases are ongoing, but Alignment is drawing on the same legal argument in challenging its 2027 results.

The CMS’ practice of tweaking stars methodology in technical notes, instead of notice-and-comment rulemaking, is in violation of the Administrative Procedure Act, the suit alleges.

“Once again, CMS has used the same ten measures in calculating Alignment’s 2027 Star Ratings without first promulgating them ‘by regulation,’ as Congress expressly required,” Alignment argues in its complaint. “Indeed, the legality of CMS’s use of these same measures is already before this Court in Alignment’s pending challenge to its 2026 Star Ratings. CMS’s continued reliance on those measures for 2027 presents the same legal question.”

According to the suit, Alignment requested that the CMS determine its 2027 stars without the contested measures on Oct. 6. The CMS denied the request on Oct. 7, before releasing 2027 stars Oct. 8.

The CMS did not respond to a request for comment. But the litigation builds on growing scrutiny of the MA stars program, from insurers unhappy that regulators can move the goalposts for achieving high scores, and from criticism from budget hawks and health policy researchers that the system doesn’t improve plan quality and may be contributing to overpayments.