Elevance sues over Medicare Advantage star ratings

The health insurance industry's fight against changes that made top Medicare Advantage star ratings harder to earn has finally found its way to the courts.

Elevance Health and its state-based subsidiaries initiated a lawsuit against the federal government last week demanding the Centers for Medicare and Medicaid Services undo technical changes to the star ratings program, recalculate scores and redetermine quality bonus payments.

Related: TukeyGate: Insurers vexed by Medicare Advantage star ratings declines

CMS violated the Administrative Procedure Act of 1946 when promulgating the Medicare Advantage star ratings regulations, the plaintiffs allege in a complaint filed to the U.S. District Court for the District of Columbia on Dec. 29. CMS declined to comment. Elevance Health and the Health and Human Services Department did not respond to interview requests.

The Medicare Advantage star ratings program assesses performance using 42 measures, such as medication adherence and access to mammograms, and rewards plans that receive at least four out of five stars with 5% bonus payments. Those bonuses totaled at least $12.8 billion last year, according to a KFF analysis.

CMS undertook a number of steps to toughen star ratings requirements after scores ballooned, which resulted in fewer Medicare Advantage plans qualifying for bonuses. For the current plan year, 42% of Medicare Advantage plans achieved four or five stars, down from 51% in 2023 and nearly 70% in 2022, CMS reported in October.

High quality scores entice potential members and bonuses help finance supplemental benefits that attract and retain customers, Elevance Health asserts in the complaint.

Elevance Health reported one of the largest ratings declines among large insurers last year, which it estimated will reduce revenue by $500 million in 2024. CMS also barred one of its plans from geographic expansion because of its low score.

Health insurance companies protested the star ratings program modifications when CMS issued its regulations. The Elevance Health lawsuit reiterates some of the industry's broad objections and makes specific claims about the agency's allegedly unlawful administrative actions.

The case zeroes in on what the industry has dubbed "TukeyGate," referring to a change in star ratings methodology designed to better account for outliers. CMS intends the so-called Tukey Outer Fence Outlier Deletion Method to stabilize big swings in annual star ratings.

The way CMS went about implementing this new policy, however, could make it vulnerable. Although the agency notified insurers in 2020 that it planned to deploy Tukey for the 2024 plan year, all references to it in CMS rules disappeared in 2022 only to reappear last year. The agency blamed the deletions on an "input error."

The agency should have restarted the regulatory process after it removed Tukey from its proposals in 2022, Elevance Health argues. CMS uses a guardrail to limit scoring changes to 5% each year, which it should have applied before the Tukey adjustment, rather than factoring in Tukey first and then the guardrail, the insurer argues.

"CMS' violation of the guardrails requirement had a significant impact on star ratings across the industry by causing overall star ratings to drop significantly and making it harder for contracts to improve or even maintain their star ratings," the lawsuit says.

Elevance Health also calls out the CMS "secret shopper" oversight program.

According to the complaint, a secret shopper reported that Elevance Health failed to connect them to an appropriate representative last year, which led to a lower score on the foreign language translation services measure and a weaker overall rating, which translated into $190 million in lost bonus payments. Elevance Health has no record of such a call taking place, the company asserts in the lawsuit.