The Centers for Medicare and Medicaid Services has recalculated some Medicare Advantage star ratings for the 2024 plan year after two federal courts found it improperly modified how it assesses quality, the agency notified health insurance companies Thursday.
In addition to the possibility of revised scores and additional revenue for 2024, Medicare Advantage carriers whose star ratings are increased will be permitted to resubmit their bids for next year.
Related: What the Medicare Advantage lawsuit means
CMS has reviewed the star ratings for insurers that stood to benefit from a recalculation and receive higher bonus payments, the agency wrote in a memorandum.
Medicare Advantage plans that earn at least 3.5 stars out of 5 qualify for bonuses. That extra funding is crucial to a core Medicare Advantage market strategy of using that money to offer lower out-of-pocket costs and supplemental benefits.
But health insurance companies applied to participate in Medicare Advantage next year under their previous scores, and without bonus money they would have received. Insurers that intend to resubmit their 2025 bids must notify CMS by Tuesday and file revised submissions by June 28, CMS wrote.
CMS did not specify how many contracts it recalculated and for which companies, nor disclose how much more in quality awards it will pay out. The Wall Street Journal first reported that CMS would redo the 2024 star ratings.
Sixty contracts covering 1.9 million enrollees from 40 insurers will receive higher star ratings, according to an analysis from Baltimore Health Analytics, which consults with insurers on star ratings. CMS will have to pay out $1.3 billion in additional bonus payments, according to an analysis the data analytics company Hyperlift Logic performed for Modern Healthcare.
CMS did not provide information on how it plans to calculate star ratings next year. These scores are slated to be released in October.
Federal authorities have not decided whether to appeal the court losses that precipitated this pivot on the Medicare Advantage Star Ratings program, a CMS spokesperson wrote in an email.
“CMS' decision to recalculate 2024 star ratings as described herein has no bearing on CMS’ potential exercise of its right to appeal those decisions,” the spokesperson wrote.
SCAN Health Plan and Elevance Health prevailed in separate but similar federal lawsuits challenging their 2024 star ratings and payments this month. Hometown Health Plan, a subsidiary of Reno, Nevada-based Renown Health, sued but dropped its case. Clover Health filed a motion to stay its lawsuit on Tuesday. Zing Health's case is ongoing.
At issue is how CMS enacted a methodological change to quality assessment that removed outliers, called the Tukey Outer Fence Outlier Deletion Method. Health insurance companies protested that the agency unlawfully implemented a regulatory change, and federal courts agreed in the SCAN Health Plan and Elevance Health cases.
