---

A recent federal court ruling in favor of a Medicare Advantage insurer is expected to influence how the federal government calculates quality ratings for some health plans, a change that could ripple through insurers’ 2027 benefit offerings for millions of Medicare beneficiaries.

The Centers for Medicare & Medicaid Services (CMS) has begun recalculating quality bonus payment ratings for certain Medicare Advantage contracts after the court found flaws in how the agency evaluated one insurer’s plan. The recalculations could result in higher star ratings for some plans, potentially increasing the bonus payments insurers receive from Medicare. 

The Medicare Advantage star rating system grades private health plans on a five-star scale using measures such as health outcomes, patient experience, customer service, and access to care. Plans earning at least four stars qualify for quality bonus payments, which insurers often use to fund lower premiums, richer supplemental benefits, or reduced out-of-pocket costs for enrollees.

---

Timing is critical

Because insurers are currently assembling their Medicare Advantage offerings for the 2027 plan year, the recalculated ratings could give some companies greater financial flexibility before benefit packages are finalized.

The CMS recently informed Medicare Advantage organizations that affected plans would receive recalculated 2027 Quality Bonus Payment ratings. According to industry reports, if a recalculation raises a plan’s rating, the higher score can be used for 2027 payments, and affected insurers may have an opportunity to revise their 2027 bids to reflect the updated ratings. 

The ruling stems from a lawsuit brought by Clover Health, which challenged the CMS’ methodology for calculating its Medicare Advantage star ratings. A federal court agreed that aspects of the agency’s methodology were unlawful, prompting the CMS to revisit ratings for other plans that could have been affected by the same issues. 

The decision has already triggered additional litigation. Elevance Health recently filed its own lawsuit, arguing that the CMS’ recalculation did not fully comply with the court’s ruling and deprived the company of an estimated $115 million in bonus payments.

---

High stakes

The dispute underscores the enormous financial stakes surrounding Medicare Advantage star ratings. The CMS estimates that quality bonus payments tied to star ratings total billions of dollars annually, making even modest changes in ratings financially significant for insurers. 

At the same time, the CMS has been revising the star ratings program as part of its Contract Year 2027 Medicare Advantage and Part D final rule. The agency is eliminating several administrative measures that it believes no longer distinguish plan performance, continuing to emphasize clinical outcomes and patient experience, and making other technical adjustments intended to improve the usefulness of the ratings for consumers. 

For Medicare beneficiaries, the legal fight is unlikely to produce immediate changes before this year’s enrollment season. However, higher star ratings could enable some insurers to offer more generous benefits in 2027, while also affecting how plans market themselves during the annual Medicare enrollment period.

The broader legal battle also raises questions about the future of the Medicare Advantage quality rating system, which has become increasingly contentious as insurers challenge the methods CMS uses to determine scores that can mean the difference between receiving — or losing — substantial federal bonus payments.