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The Centers for Medicare and Medicaid Services has rejected an appeal from Humana to improve the latter’s Medicare Advantage star ratings, which could cost the insurer significant revenue in 2026.
On April 15, Humana and American for Beneficiary Choice submitted notice to bring to the court’s attention an April 14 denial by CMS of the administrative appeal of Humana’s 2026 quality bonus payment.
The decision is subject to review by a CMS administrator within 10 days. If nothing is modified, CMS’s decision will become final on April 28, according to court documents filed in federal court in the Northern District of Texas.
The decision was the latest chapter in ongoing litigation between Humana and CMS. When the insurer filed suit in October 2024, it cited star ratings that were significantly lower than the year prior, and focused largely on cut points, the upper and lower thresholds for each measure. Cut points determine a plan’s overall score, from 1 to 5 stars.
Cut points for several measures “moved abruptly and substantially upward, significantly depressing MAOs’ Star Ratings, including Humana’s,” the lawsuit said. “Under the 2024 ratings, 94% of Humana’s MA enrollees were in a plan with 4 stars or higher. As a result of the unexplained swings in the most recent cut points calculated by CMS, now only 25% of its enrollees are in plans rated 4 stars and above for 2025.”
Also, CMS did not follow its own ground rules on decision-making and failed to provide needed data, the complaint said.
“The claims in this case have never been about mere calculation errors; they are, instead, about the rules, regulations, and methodologies that CMS (and its unconstitutionally delegated contractor) use to determine the Star Ratings at a systemic level,” the insurer wrote.
Only seven plans received 5 stars for Parts C and D performance in the 2025 Medicare Advantage and Part D Star Ratings released by CMS last fall. This compares with 38 contracts that received 5 stars in 2024.
Preliminary data from last fall showed only about 25% of Humana’s members are enrolled in Medicare Advantage plans rated 4 stars or higher, down from 94% in 2024, according to Marketwatch. As the main reason for the ratings dip, Humana cited a drop in ratings for its H5216 plan, which fell from 4.5 to 3.5 stars. The plan contains about 45% of the insurer’s Medicare Advantage membership and 90% of its employer group waiver plan membership.
Humana reported a 10% revenue increase in its 2024 Q4 and full-year financial results, but that was about the only bright spot. Rising healthcare utilization and insufficient CMS rate increases have affected Humana’s profitability, with shares down 50% from their 2023 peak.
For the quarter, Humana posted a $693 million loss, more than in the previous quarter, when it lost $541 million. Profits were also down: They stood at about $1.2 billion for the year, about half of its 2023 total, when it raked in $2.5 billion in profit.
THE LARGER TREND
Humana followed UnitedHealth Group and Elevance in filing a lawsuit against CMS and HHS over the star ratings results. All of the insurers cited a change in cut points as a major reason for their plans receiving lower star ratings this year over last.
UnitedHealth won its lawsuit in late 2024. CMS appealed and then dropped the appeal.
Jeff Lagasse is editor of Healthcare Finance News.
Email: [email protected]
Healthcare Finance News is a HIMSS Media publication.
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