UnitedHealthcare sues CMS over Medicare Advantage star ratings downgrade
Insurer is seeking an injunction, claiming the downgrade was based on an "arbitrary and capricious" assessment.
Photo: Pichsakul Promrungsee EyeEm/Getty Images
UnitedHealthcare, one of the largest players in the Medicare Advantage market, has filed a lawsuit against the Centers for Medicare and Medicaid Services (CMS) following a downgrade in its star ratings.
The lawsuit, filed in late September, challenges CMS's decision to lower the company's star ratings, an important factor in determining Medicare Advantage plans' reimbursement rates and competitiveness in the MA market.
The lawsuit comes as the Medicare Advantage open enrollment period begins on October 15, and UnitedHealthcare made the case that a lower rating could have significant financial repercussions.
The insurer is seeking an injunction to reverse the rating downgrade, which it claims was based on an "arbitrary and capricious" assessment linked to a single phone call between a UnitedHealthcare customer service representative and a CMS "secret shopper."
WHAT'S THE IMPACT?
In its complaint, UnitedHealthcare argued that the rating downgrade is based on a single interaction between a customer service representative and a CMS secret shopper posing as a Medicare beneficiary.
According to the insurer, this brief phone call was used as the basis to lower its star rating, a move the insurer describes as disproportionate and damaging. The lawsuit characterizes the CMS decision as "arbitrary and capricious" and asks the court to intervene ahead of the open enrollment period.
A lower star rating could lead to fewer enrollments and potentially reduce the insurer's bonuses and payments from CMS.
With Medicare Advantage plans playing a central role in UnitedHealthcare's portfolio, any change to star ratings could affect its profitability. Lower ratings may result in fewer enrollments, reduced bonuses, and even customer attrition as beneficiaries look for higher-rated plans.
Last December, UnitedHealthcare set its 2024 MA enrollment predictions for less than 8.1 million this year, below market forecasts. But in its Investor Conference report, United Health said it expected its Medicare Advantage business to grow.
Medicare Advantage is serving an increasingly diverse, lower-income and clinically complex population, the company said. Seniors with chronic conditions are more likely to choose Medicare Advantage, and more than half of Medicare Advantage members have an annual income of less than $25,000. Medicare Advantage enrollment among minority populations has more than doubled since 2013, and now makes up more than 30% of Medicare Advantage membership.
THE LARGER TREND
UnitedHealthcare isn't the only insurer to experience struggles in the Medicare Advantage space. Just this week, Humana shares plunged after the insurer disclosed a sharp reduction in the number of members enrolled in high star Medicare Advantage plans. Humana said it learned in preliminary data released by the Centers for Medicare and Medicaid Services that members enrolled in 4-star plans or above reached 1.6 million, or 25% of all members for 2025, down from a 94% enrollment in 2024.
Humana is challenging the results, according to an October 2 filing with the Securities and Exchange Commission, with Humana saying there may be potential errors in CMS' calculations of its results and industry cut points, which are the upper and lower thresholds for each measure that determine a plan's overall score, from 1-5 stars.
Jeff Lagasse is editor of Healthcare Finance News.
Email: jlagasse@himss.org
Healthcare Finance News is a HIMSS Media publication.
