CMS Rejects Humana’s Medicare Rating Appeal

Insurer Faces Significant Financial Impact

Humana, one of America’s largest Medicare Advantage organizations, has reached a critical juncture in its ongoing dispute with the Centers for Medicare & Medicaid Services (CMS). According to a recent court filing, CMS has rejected Humana’s administrative appeal regarding its star rating quality bonus payment scores. This decision will become “final and binding” by April 28, with a CMS officer having until that date to potentially modify the denial notice.

Legal Battle Over “Arbitrary” Methodology

The rejection comes amid Humana’s lawsuit against CMS, filed alongside the nonprofit trade association Americans for Beneficiary Choice. In its legal challenge, Humana contends that the federal government’s actions violate the Administrative Procedure Act, characterizing them as “arbitrary” and detrimental to beneficiaries.

Humana has now informed the court of this rejection in response to CMS’s previous motion to dismiss the lawsuit. The federal agency had argued that dismissal was appropriate because Humana had not yet completed the administrative claims process.

Appeal Process Deemed Futile

According to Humana’s court documents, pursuing an administrative appeal was never going to yield positive results. The insurer’s fundamental argument centers not on calculation errors but on the fairness of CMS’s methodology itself. Additionally, Humana claims that an “unconstitutionally-delegated contractor” implements the CMS regulations and methodology that determine these critical ratings.

Given these circumstances, Humana is now requesting an expedited judgment from the court.

Beyond Technical Disagreements

“The data and calculations underlying the annual star ratings are dizzyingly complex, and at a first glance, this suit may appear to be a dry disagreement over technical details,” the health plan stated in court documents. “It is anything but.”

Humana’s legal argument extends beyond mere calculations. The insurer alleges that CMS has failed to follow its own regulations by:

• Not fully disclosing all star ratings recalculation criteria
• Refusing to cooperate with the company’s inquiries
• Incorrectly calculating two specific star ratings measures

Careful Consideration Led to Legal Action

“Humana’s decision to take this legal action came only after careful consideration,” a spokesperson told Fierce Healthcare. “We believe this litigation is in the best interest of Humana members and is necessary to ensure star ratings are accurate, trustworthy and representative of plan quality.”

Dramatic Ratings Decline

The stakes for Humana are exceptionally high. Under the current year’s star ratings, an impressive 94% of Humana’s Medicare Advantage enrollees were in four-star plans or better. However, for 2025, that percentage plummets dramatically to just one-quarter of its members remaining in similarly valued plans.

This precipitous decline stems from sharply increased cut point thresholds—the metrics that plans must meet to achieve higher ratings. The industry-wide impact is significant: 18.71% of enrollees were in 3.5-star plans in 2023, compared to 27.71% projected for 2025.

Phone Call Controversies

Humana isn’t alone in challenging CMS’s evaluation methods. UnitedHealth Group recently filed its own lawsuit, claiming a single customer service phone call unfairly damaged the company’s star ratings. Similarly, Humana’s lawsuit argues that three specific phone calls were scored unfairly:

• Two calls were disconnected early due to third-party internet connection interruptions, with CMS callers refusing to accept callbacks
• Another call was categorized incorrectly despite no communication occurring on either end, yet the insurer still faced penalties

Strategic Legal Approach

According to strategy firm Capstone, Humana’s legal maneuver appears well-calculated. The firm filed its lawsuit in the District Court for the Northern District of Texas, which is presided over by Judge Reed O’Connor, known for business-friendly rulings.

Validation Concerns and Financial Implications

Humana contends it was denied the opportunity to review and validate CMS’s scores—a practice the insurer claims is standard procedure. After the final star ratings were released, Humana reports it could not replicate 60% of CMS’s cut point calculations.

The financial ramifications of potentially incorrect scoring are substantial. Even minor variations can significantly impact an insurer’s bottom line, as plans with higher star ratings receive greater rebates from CMS. These financial benefits help attract and retain beneficiaries to Medicare Advantage plans.

Precedent for Success

Notably, Humana may have reason for optimism. Two other insurers—Elevance Health and SCAN Health Plan—have already successfully won star ratings lawsuits against federal authorities, establishing potential precedent for Humana’s case.

As this legal battle unfolds, the outcome will likely have far-reaching implications not only for Humana but for the entire Medicare Advantage marketplace and the millions of seniors who depend on these plans for their healthcare coverage.