Clover Health has received a significant boost after federal regulators upgraded its 2026 Medicare Advantage star rating. The improvement strengthens the insurer’s competitive position and could unlock millions of dollars in bonus payments in the coming years.
The Centers for Medicare & Medicaid Services (CMS) increased Clover Health’s primary Medicare Advantage PPO contract rating from 3.5 stars to 4.5 stars. The revised rating follows a federal court ruling that required CMS to recalculate the insurer’s scores after finding flaws in the agency’s methodology. The upgrade affects Clover’s largest contract, which covers approximately 97% of its Medicare Advantage members.
The company’s HMO contract was not part of the legal challenge and will retain its existing 4-star rating.
Why the Star Rating Matters
Star Ratings Drive Bonus Payments
CMS evaluates Medicare Advantage plans annually using a five-star system. Ratings are based on quality measures such as patient outcomes, medication adherence, customer satisfaction, and care coordination.
Plans that achieve 4 stars or higher qualify for quality bonus payments. These incentives allow insurers to enhance benefits, lower premiums, and invest in member services. Therefore, Clover’s jump to 4.5 stars could have a substantial impact on its future revenue and growth prospects.
A Competitive Advantage
Moreover, higher ratings often help insurers attract new members during Medicare enrollment periods. Beneficiaries frequently use star ratings as a benchmark when comparing plans.
As a result, Clover may gain an edge against larger competitors in the Medicare Advantage market. The company already reported strong membership growth in 2026 and now enters future enrollment seasons with a stronger quality profile.
Federal Court Orders CMS Recalculation
The Lawsuit Against CMS
The ratings upgrade stems from a lawsuit Clover filed in late 2025 against CMS and the U.S. Department of Health and Human Services.
Clover argued that CMS improperly included 20 measures when calculating its 2026 PPO rating. The insurer claimed the methodology unfairly lowered its score from 4 stars to 3.5 stars and jeopardized approximately $120 million in bonus and related payments.
In May 2026, a federal judge in Georgia ruled partially in Clover’s favor. The court determined that CMS had improperly incorporated certain measures and ordered the agency to recalculate the company’s rating.
CMS Responds to the Court Order
Following the ruling, CMS recalculated Clover’s rating and upgraded the PPO contract to 4.5 stars.
The agency also instructed Clover to submit alternate bids reflecting the improved rating. Since Medicare Advantage star ratings directly influence reimbursement levels, the change will affect the company’s payment year 2027 results.
Financial Impact of the Upgrade
Higher Payments Ahead
The new rating could generate meaningful financial benefits for Clover.
Quality bonus payments are a key revenue driver for Medicare Advantage insurers. By surpassing the critical 4-star threshold, Clover becomes eligible for increased benchmark payments that can support richer benefits and improved profitability.
Investors reacted positively to the news. Shares of Clover Health climbed sharply after the company announced the revised rating, signaling confidence in its future earnings potential.
Growing Membership Base
The timing of the upgrade is also notable.
Earlier this year, Clover reported a 53% increase in Medicare Advantage membership, reaching approximately 153,000 members. The company stated that nearly all of these members are enrolled in its flagship PPO plan, which now carries the upgraded 4.5-star rating.
Consequently, the rating improvement could reinforce Clover’s growth trajectory and strengthen member retention.
What This Means for Medicare Advantage Competition
The Clover ruling could have implications beyond a single insurer.
Other Medicare Advantage organizations are closely monitoring the case. In fact, another insurer, CareFirst BlueCross BlueShield, recently requested a temporary pause in its own star ratings lawsuit so CMS could assess the broader implications of the Clover decision.
The case also highlights increasing scrutiny over how CMS calculates star ratings. Insurers depend heavily on these scores because they influence payments, member acquisition, and market competitiveness.
Therefore, future disputes over rating methodologies may become more common as plans seek greater transparency and consistency from regulators.
Outlook for Clover Health
Clover Health’s legal victory represents more than a ratings upgrade. It demonstrates how Medicare Advantage insurers are willing to challenge regulatory decisions that significantly affect their finances and growth.
With a 4.5-star PPO plan covering most of its members, Clover now enters the 2027 payment cycle from a position of strength. The insurer can leverage higher bonus payments, stronger marketing appeal, and growing membership to expand its presence in the Medicare Advantage market.
While CMS may continue refining its rating methodologies, Clover’s recent success underscores the importance of quality scores in shaping the future of Medicare Advantage.
As competition intensifies, insurers that combine strong clinical performance with favorable ratings will likely emerge as the biggest winners.
