This blog is a quick follow-up on the recent federal court decision in favor of Clover Health. The judge ruled that the Centers for Medicare and Medicaid Services (CMS) could not include 20 current measures in the Star Rating program as they either are not allowed via statute or the agency failed to notice their inclusion or changes properly. The judge ordered Clover’s 2026 Star ratings to be recalculated.
The agency moved swiftly and in an investor release Clover announced that CMS has recalculated its SY 2026 rating for its largest contract and advised the plan to submit an alternative 2027 bid. SY 2026 Star ratings impact 2027 calendar year payments.
If and when the recalculation is applied, all of Clover Health’s 156,000 Medicare Advantage members would now be enrolled in plans rated at least four of five stars, generating some $120M in bonus payments in 2027.
But there is a great deal of nuance in the investor release and CMS’ order. It did indeed recalculate the contract’s rating. But that does not mean yet that CMS will actually award the new ratings to Clover. And the fact that it advised the plan to submit an alternative bid seems to underscore this point. CMS did not ask for a replacement bid, but another one to go along with the one Clover had recently submitted for 2027.
In essence, if you read between the lines, CMS has not yet thrown in the towel on the lawsuit. It likely plans to appeal even as it meets the letter of the judge’s ruling. In the end, this is a small positive step for Clover, but not definitive for the plan yet.
The recalculation could lead to a number of possible scenarios.
- CMS appeals and asks for a stay of the judge’s ruling. This would mean Clover’s original rating would stand until such time as the case is finally decided. That could take a great deal of time.
- If no stay is granted at the appellate level, we could see more plans challenging their ratings because they do better under the ruling than the status quo. This is especially the case if CMS changes just Clover’s rating.
- If no stay is granted, CMS could decide to adjust many plans’ ratings. If they follow what they did in the 2024 Tukey ruling, it might grant the better of the original SY 2026 rating or one that comports with the Clover decision. My estimates suggest this could cost over $1 billion in 2027.
- There is a chance that Congress could jump in and act before the end of the year. This could be so due to fears that yet more fallout could occur in terms of benefits just as the midterms heat up. We already expect more benefit erosion due to a small hike for 2027. A Clover scenario could mean yet more retrenchment by plans just as the public is stepping into the ballot box.
It is interesting to note that at least two other Stars lawsuits could be impacted by the Clover decision. Humana advised the judge in its case of the Clover decision. And the judge in the CareFirst lawsuit has agreed to delay a ruling given the Clover case.
As I said in my detailed blog when the decision occurred, I do not believe Stars is going anywhere. It is too important to value-based care overall. CMS certainly would not stand for a stump of a ratings system for too long, especially with no Part D measurement. Big plans will lobby for a fix as well. But the decision does throw more uncertainty into Stars and plan finances.
#stars #quality #cms #medicareadvantage #partd #pdp
— Marc S. Ryan
