Humana’s Medicare Advantage Plan Ruling
On October 14, a U.S. judge ruled against Humana Inc. in its attempt to challenge the Centers for Medicare and Medicaid Services (CMS) regarding the star ratings for Medicare Advantage plans. This decision comes with potential financial implications for health insurers, as these ratings impact millions in government bonus payments.
U.S. District Judge Reed O’Connor, based in Fort Worth, Texas, supported the U.S. Department of Health and Human Services (HHS) in Humana’s lawsuit, affirming that CMS adequately assessed these plans. There’s a lot at stake here; the star ratings can lead to significant income, and a lower rating might cost companies a substantial amount.
A representative from Humana mentioned that the company is weighing its legal options moving forward. They emphasized their commitment to enhancing the quality of their star ratings to regain higher performance levels as swiftly as possible.
In light of the ruling, a spokesperson for HHS noted that the agency refrains from commenting on ongoing litigation.
Humana stands as one of the largest Medicare Advantage providers in the U.S., with plans funded by Medicare, yet managed by private insurers. CMS rates these plans on a scale of one to five stars, where higher ratings can significantly increase government payments for keeping costs down. These amounts can be staggering, reaching hundreds of millions or even billions.
Following the judge’s ruling, Humana’s stock dropped by 3.6%, reaching $261.11 during afternoon trading, marking almost a 12% decrease for the week.
The lawsuit, originally filed in July, contested the 2025 star rating of 3.5 stars. Humana argued that this rating could lead to customer loss and trigger massive financial setbacks, which they planned to use to offer better benefits and reduce premiums for members.
This legal challenge follows an earlier ruling where O’Connor dismissed Humana’s previous complaint regarding the star ratings, noting the company hadn’t exhausted all available administrative options yet.
Humana contested the rating calculations, asserting they were unjustly lowered due to CMS testing of their customer service support, particularly for clients with limited English proficiency. They requested CMS to reassess and possibly revise their rating for 2025.
In its filings, HHS defended its methods, arguing that assessing customer service pathways was a valid measure of accessibility to the company. In this latest decision, Judge O’Connor countered Humana’s claims, stating that the evaluation guidance was not arbitrary according to federal law.
