Cut points are fundamental to how CMS awards stars. Each year, the agency evaluates plan performance on about 40 measures, which each receive a score out of five based on where cut points are set.
Cut points and overall star ratings for 2025 will be based on 2023 data. If the cut point for breast cancer screening is higher, for example, then a greater share of eligible members needed to get tested to qualify for a high score.
“It is absolutely a guessing game,” said Michael Bagel, associate vice president of public policy at the Alliance of Community Health Plans, which represents nonprofit insurers. “But it's one where you say, ‘I'm not going to do it just because I want to perform well on stars, but I want to do it because it's going to deliver a better product,' and you hope that delivery of a better product then shows up in your star rating.”
Underscoring how small shifts can accumulate into major consequences, Humana disclosed to investors Wednesday it narrowly missed the cut points on several measures, based on preliminary CMS data, leading to a massive drop in the number of members in top-rated plans. According to the company, the share of Humana Medicare Advantage enrollees in plans with at least four stars fell from 94% to 25%. "Humana believes there may be potential errors in CMS’ calculation of certain of its results and industry threshold cut points" and is asking the agency to reconsider, the company wrote in a filing to the Securities and Exchange Commission.
Why cut points are increasing
In a way, the steeper path toward the highest star ratings is a consequence of the quality improvements Medicare Advantage carriers have achieved over time. At the same time, average star ratings climbed over the years, leading CMS to raise the bar and make top scores harder to earn.
CMS uses a statistical method to determine cut points for most measures based on overall market performance. But the application of the Tukey Outer Fence Outlier Deletion Method, which was first used to calculate current star ratings for the 2024 plan year, continues to shift up cut points, mostly by removing the lowest-performing plans from the formula.
CMS recalculated star ratings in June after federal courts sided with Elevance Health and Scan Health Plan, which argued the agency did not follow proper regulatory procedure when it implemented Tukey.
“[Tukey] has introduced more uncertainty into the system, and it's made it more difficult for plans to predict what an actual real increase in quality will net them, in terms of keeping their star rating the same or improving,” said Sean Creighton, managing director at the healthcare consulting company Avalere.
More than 60% of cut points are increasing, Whit Mayo, a senior managing director for equity research at the investment bank Leerink Partners, wrote in a note to investors Sept. 9. Compounding changes to the Medicare Advantage Star Ratings program have “led to the highest star rating cut points in the history of the Star Ratings program,” according to a report the Wakely Consulting Group, a division of Health Management Associates, published Sept. 18.
“You would have this volatility that was up and down. The volatility now is just up,” said Suzanna-Grace Tritt, a senior consulting actuary at Wakely Consulting Group and co-author of the report.
For 2025, almost all cut points increased for Healthcare Effectiveness Data and Information Set, or HEDIS, measures such as breast cancer screening, administrative measures such as call center availability, and pharmacy metrics such as medication adherence for hypertension. Specifically, many of the cut points for HEDIS and administrative measures grew by the maximum 5% allowed annually, according to the Wakely Consulting Group report.
Continued use of Tukey will make it harder for plans to improve or maintain star ratings for the next few years, Tritt said. To improve performance, health insurers should identify where there are gaps in care among individual measures, engage members and collaborate with providers, she said.
What it means for insurers
Star ratings are big for Medicare Advantage carriers. Health plans with four or more stars earn 5% quality bonus payments, which they use to finance supplemental benefits and zero-premium plans to attract customers.
This year, CMS will award Medicare Advantage carriers $11.8 billion in bonus payments, half of which will go to UnitedHealth Group subsidiary UnitedHealthcare and Humana, according to a report by healthcare research institution KFF. Star ratings for 2025 will drive bonus payments for 2026.
The changes to cut points used to determine 2025 star ratings may put the most pressure on Alignment Health followed by Humana, CVS Health subsidiary Aetna and UnitedHealthcare, according to Mayo's analysis.
Take Alignment Health, for example. One of its contracts, which is rated four stars and covers more than 85% of its membership, would fall to a 3.5 rating using the cut points for 2025, assuming performance remained the same, Mayo said. In short, the same inputs would result in a lower score.
The Blue Cross Blue Shield Association supports CMS’ efforts to push plans toward continuous quality improvement but is concerned with its approach, according to a spokesperson.
“The current pace of significant changes and new measures coming in the next two years will reduce the overall number of 4+ Star plans,” a spokesperson wrote in an email. “We want to maintain benefits for our members, but it will be a challenge for insurers to do that as they face reductions in quality bonus payments.”
CMS will release star ratings for 2025 ahead of the Medicare annual enrollment period, which runs Oct. 15 to Dec. 7. The potential hit to some star ratings is coming at a time that’s already expected to bring disruption to consumers. Millions of beneficiaries could be forced to enroll in a new health plan as insurers exit markets and modify benefit designs.
“Frankly, we're going to see in 2025 less five-star plans than we've seen before,” Bagel said. “We're going to see overall star ratings decrease, and that's a reflection both of it's harder to achieve stars and the natural reflection of what you see in a very competitive MA landscape.”
