The new ratings come after the insurer sued the federal government in January.
Elevance Health will now have four Medicare Advantage (MA) contracts with higher 2024 ratings after CMS updated the original scores announced in October, according to a regulatory filing.
According to the filing, Elevance estimates that about 49% of its MA members will be enrolled in a plan with at least four stars in 2024. As a result, Elevance will see approximately a $190M payout for 2025.
Following the pandemic, CMS made stricter adjustments to how it issues MA star ratings. When the original ratings were announced in October, Elevance members that were enrolled in plans rated at four stars or more dropped from 64% in 2023 to 34% in 2024.
Three of the insurer’s biggest MA contracts (based on enrollment) dropped from 4.5/4 stars to 3.5 stars. The ultimate impact of the lower ratings meant a $500 million drop in Elevance’s revenue for 2025.
What happened?
Elevance sued HHS back in January over alleged miscalculations in their MA star ratings. The insurer was set to lose $190Mㅡthe same amount it will gain after the revised ratingsㅡafter its call center missed a single call from CMS. CMS denied giving the insurer five stars on this measurement because it did not meet the 99% success rate, but Elevance states that the call dropped through no fault of its own.
The lawsuit also argues that it would have been impossible for Elevance to meet that success rate, as CMS used a calculation method that mathematically wouldn’t have allowed the cut point to be reached unless not a single call was missed.
During the pandemic, relief provisions caused Medicare star ratings to inflate. Regulators saw this inflation and took steps to reel in ratings, resulting in less plans achieving the four-star threshold. Payers bonuses therefore suffered in 2024, falling to 42% compared to 51% in 2023.
While CMS cannot increase or decrease cut points by more than 5% each year, it calculates cut points for specific individual measures to determine a plan’s score on that specific measure.
In 2020 CMS finalized its usage of the Tukey method to decide 2024 star ratings; this involved removing outlier contract scores to avoid influencing cut points. This made it more difficult for plans to earn high ratings because most outliers are on the lower end and removing them shifted cut points to a higher range.
In the lawsuit Elevance argued that the Tukey method was used as an "unlawful, and arbitrary and capricious" methodology to change star ratings. The insurer argued that Tukey does not consider the 5 percent guardrail for cut points and therefore CMS violated the guardrail regulation when deciding 2024 star ratings.
What does it mean for other payers?
Elevance was able to sue HHS and garner new, improved ratings, but could other insurers follow with the same argument?
As Elevance basks in its newfound star ratings, other insurers could look at its legal action against HHS as a guide for how to argue for better ratings.
Marie DeFreitas is an associate content specialist at HealthLeaders.
KEY TAKEAWAYS
Elevance sees $190M gain from new star ratings
The insurer sued HHS back in January over alleged miscalculations in its MA star ratings
Elevance’s lower ratings would have meant a $500M drop in 2025 revenue