Elevance Health and its insurance subsidiaries have initiated legal action against the Department of Health and Human Services (HHS) over alterations in the methodology used to calculate Medicare Advantage and Part D star ratings. The changes, deemed “unlawful and arbitrary,” have adversely affected Elevance’s revenue projections, leading to an estimated loss of $500 million in 2025. The lawsuit challenges the “Tukey” method implemented by CMS in 2024, alleging that it unfairly skewed star ratings downward, impacting Elevance and the industry as a whole. Additionally, discrepancies related to a specific evaluation measure further compound the lawsuit’s claims, with Elevance seeking judicial intervention to rectify the alleged inaccuracies in star ratings and bonus payments.
Elevance Health, along with its insurance subsidiaries, has taken legal action against the Department of Health and Human Services (HHS) concerning modifications in the methodology used to determine Medicare Advantage and Part D star ratings. These changes have provoked substantial financial implications, with Elevance anticipating a staggering $500 million revenue loss in 2025. Primarily contested is the “Tukey” method introduced by CMS in 2024, believed to have unfairly impacted star ratings, resulting in adverse consequences for Elevance and the broader industry. Alleged discrepancies in specific evaluation measures have further fueled the lawsuit’s contention against the accuracy of star ratings and consequent bonus payments.
Elevance Health and its affiliated insurance entities have embarked on a legal battle against the Department of Health and Human Services (HHS), accusing them of employing methodology alterations that are deemed “unlawful, arbitrary, and capricious” in the calculation of Medicare Advantage and Part D star ratings.
Medicare Advantage plans are subject to a framework incorporating 40 performance and quality measures, necessitating star ratings of four or higher to qualify for quality bonus payments from the Centers for Medicare & Medicaid Services (CMS). The collective average star rating for Medicare Advantage saw a slight dip in 2024, averaging 4.04.
Elevance Health revealed projections in October indicating an estimated revenue loss of approximately $500 million in 2025 due to the diminishing star ratings. CEO Gail Boudreaux attributed a portion of this decline to recent alterations in CMS’ methodology for star rating computation. Elevance witnessed a notable decrease in the percentage of its members enrolled in contracts rated at four stars or higher, plummeting from 64% in 2023 to 34% in 2024.
The lawsuit, filed in Washington, D.C. on December 29, primarily targets the “Tukey” method—a modification announced by CMS in a 2020 final rule and implemented in the 2024 star ratings. This method entails the exclusion of extreme outliers from measure scores, aiming to prevent these outliers from unduly impacting all Medicare Advantage contracts. Consequently, it became more challenging for plans to attain a high star rating. Interestingly, the 2022 final star ratings rule from CMS omitted mention of this new change, only for the agency to reintroduce it in the 2023 rule, citing an inadvertent exclusion.
The lawsuit contends that CMS should have considered its limitations on scoring changes, capped at 5% annually, before reintroducing the Tukey change in 2023, rather than vice versa.
“Despite that unambiguous and clear regulatory obligation, CMS set cut points for 2024 star ratings that exceed the 5% guardrail — causing a dramatic downward shift in star ratings across the industry and concerning [Elevance] specifically,” the lawsuit states.
Moreover, Elevance highlighted another issue concerning a specific measure employed to evaluate plan accessibility—utilizing “secret shopper” callers to contact plans directly. Allegedly, CMS erroneously concluded that the payer failed to respond to a single phone call at a call center, despite “evidence that the call never even connected to [Elevance’s] phone lines through no fault of [Elevance].” This alleged missed call led to Elevance purportedly losing $190 million in bonus payments.
The lawsuit filed by Elevance Health and its affiliated insurance entities against the Department of Health and Human Services (HHS) underscores the severity of the dispute arising from alterations in Medicare Advantage and Part D star rating calculations. The contentious “Tukey” method implemented by CMS in 2024 and concerns regarding a specific evaluation measure have led to a projected $500 million revenue loss for Elevance in 2025. This legal action seeks not only to challenge the accuracy of star ratings but also demands a recalibration of scores and reassessment of bonus payments, aiming to rectify what is perceived as an unfair impact on Elevance and the wider healthcare industry.
