Introduction
Alignment Healthcare has initiated a legal battle against the Trump administration over its Medicare Advantage star ratings for 2027. The insurer argues that improper calculations by federal regulators could result in significant financial losses.
Legal Challenge
Alignment Healthcare filed a lawsuit against the Centers for Medicare & Medicaid Services (CMS) in Washington, D.C. The complaint alleges that CMS used measures not properly established through the rulemaking process. As stated, “CMS has used the same ten measures in calculating Alignment’s 2027 Star Ratings without first promulgating them ‘by regulation,’ as Congress expressly required.” The same issue is part of a pending complaint regarding 2026 ratings. The financial implications of lowered ratings could exceed $200 million in 2028.
Importance of Star Ratings
Medicare Advantage star ratings, ranging from one to five stars, are crucial for insurers and beneficiaries. These ratings allow consumers to compare the quality of plans and determine insurers’ eligibility for quality bonus payments. Even a half-star change can have major financial consequences. Alignment’s complaint highlights the impact of a single half-star change on plan payments.
Recent Developments
CMS released its 2027 Medicare Advantage star ratings on October 8, revealing a drop in Alignment’s California HMO contract from four stars to 3.5 stars. The shift in ratings is significant, with only 25% of Alignment members enrolled in plans receiving at least four stars in 2027, down from 98% in 2026. Healthcare Dive reports that this decline raises questions about the government’s evaluation process, as stated by Alex Beene, a financial literacy instructor.
Lawsuit Details
Alignment calls for CMS to set aside the 2027 ratings and recalculate them without disputed measures. At issue is CMS’s methodology, which Alignment claims was established through “technical notes” rather than the required rulemaking process. The company argues this violates the Administrative Procedure Act. Alignment seeks relief consistent with its 2026 Stars litigation, aiming for accurate compensation for providing quality care.
Previous Court Rulings
A federal court in Georgia previously found that 20 measures used by CMS were outside its authority, leading to a recalculation of 2026 ratings. Despite this, CMS allegedly continued to use disputed measures in 2027 calculations. This continued approach challenges the legal process, creating significant concerns for the future, as noted by financial expert Michael Ryan.
Impact on Beneficiaries
The lawsuit has implications for how plans are rated and the payments Alignment might receive. Star ratings are crucial for Medicare beneficiaries, helping them compare plans effectively. Reductions in federal payments could lead to fewer benefits and higher costs for seniors, explained Beene.
Future Considerations
Alignment seeks a recalculation of its 2027 star ratings to ensure equitable payment adjustments. The financial consequences will continue into 2028, affecting payment structures based on these ratings. The legal dispute emphasizes the importance of understanding changes in healthcare quality.
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