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Elevance Health has become the latest health insurer to sue the federal government over Medicare Advantage star ratings, which the Indianapolis-based company calls “arbitrary and capricious.”
Elevance filed suit Thursday in U.S. District Court in the Northern District of Texas, aiming to overhaul the way the way the Centers for Medicare and Medicaid Services calculates the star ratings.
The suit follows litigation by other insurers, including UnitedHealth Group, Humana and Centene.
At stake are billions of dollars in bonuses that CMS awards to insurers that achieve a certain start rating on their Medicare Advantage scores.
Medicare Advantage is a health insurance plan, generally for people 65 and older, that’s an alternative to traditional Medicare and is administered by a private health plan.
Enrollment in private Medicare Advantage plans has quadrupled in the past two decades, to 26 million Americans, according to Kaiser Family Foundation. It now covers more than 42% of all Medicare beneficiaries.
Elevance Health said it has been damaged by at least $375 million in bonus payments and rebates through Medicare’s “arbitrary” methodology in assigning stars.
The goal of the star ratings system is to help Medicare beneficiaries compare the quality of Medicare health and drug plans being offered “so they are empowered to make the best health care decisions,” Elevance said.
To calculate star ratings, CMS measures each Medicare Advantage plan on approximately 40 different quality and performance measures based on certain data sets to come up with a numerical score, Elevance said in its complaint.
CMS then takes the score from all the Medicare Advantage contracts to grade how each plan performed for each measure against other plans, and then assigns a star rating of 1 through 5 for each measure.
Insurers that receive an overall rating of four stars or higher can receive higher bonus payments.
“Yet CMS’ calculation methodology is fraught with statistical variance, which can cause improper impacts” on a health plan’s overall star rating, the complaint said.
It continues: “Indeed, despite claiming to be able to calculate the overall contract scores to the millionth decimal, CMS admits in its guidance that the calculations cannot be replicated—forcing Elevance Health and other [Medicare Advantage plans] to blindly accept that CMS performed the calculations correctly.”
One of Elevance’s contracts received a score of 3.749565, which CMS has rounded at the millionth decimal pursuant to 3.5 stars.
“However, that guidance has no basis in the statute or regulation.” Elevance said in its complaint. “Instead, the applicable regulation requires CMS to calculate Star Ratings based upon half star increments, which would necessitate rounding any … score at two decimals, such that a score of 3.75 rounds to a 4- star rating.”
CMS declined to comment on the suit.
Elevance is claiming that CMS violated the Administrative Procedure Act with an arbitrary and capricious action. It is asking the court to enter judgment against CMS and Department of Health and Human Services for each count, and to order the defendants to recalculate the score for certain contracts.
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