Medicare Insurer Sues Trump Administration Over Rating Dispute

Overview of the Legal Battle

Alignment Healthcare, a prominent Medicare Advantage insurer, is suing the Trump administration due to disputes over its 2027 star ratings. These ratings are crucial because they could lead to significant financial losses for the company, potentially costing hundreds of millions of dollars.

The lawsuit was filed against the Centers for Medicare & Medicaid Services (CMS) in federal court in Washington, D.C. Alignment Healthcare contends that CMS unlawfully calculated its Medicare Advantage quality ratings by using measures that were not properly established through the federal rulemaking process.

“Once again, CMS has used the same ten measures in calculating Alignment’s 2027 Star Ratings without first promulgating them ‘by regulation,’ as Congress expressly required,” Alignment stated in its complaint.

Implications of Star Ratings

Medicare Advantage star ratings range from one to five stars, helping consumers evaluate the quality of plans and determine if insurers qualify for bonus payments. A change in these ratings has significant financial implications for insurers. Even a half-star drop can lead to substantial financial losses, as seen in Alignment’s case.

The recent CMS ratings for 2027 affected Alignment’s California HMO contract, which dropped from four stars to 3.5 stars. Additionally, the percentage of members enrolled in plans with at least four stars decreased dramatically from 98% in 2026 to 25% in 2027.

A significant decline in ratings raises concerns about whether the evaluation process of the government accurately reflects the quality of care given. Stakeholders have noted the necessity of examining performance data more closely.

Alignment’s Legal Argument

Alignment Healthcare claims that CMS has been utilizing measures that should have been implemented through the formal notice-and-comment rulemaking process, but were instead established via “technical notes.” This approach, Alignment argues, contravenes the Administrative Procedure Act.

“The relief being sought is consistent with the relief Alignment is seeking in its Stars litigation case filed in July 2026,” a spokesperson for Alignment told Newsweek, emphasizing the need for accurate compensation based on the quality of care provided.

Previous Legal Challenges

Alignment points out that a Georgia federal court had previously invalidated several measures CMS used for the star ratings. CMS recalculated the 2026 ratings post-litigation. Still, Alignment claims that CMS continued using disputed measures for the 2027 ratings, hence this lawsuit.

The Trump administration appealed the court’s decision in a separate case involving Clover Health, leaving the broader legal dispute unresolved.

Impact on Medicare Beneficiaries

The lawsuit extends beyond financial consequences, affecting Medicare beneficiaries directly. Star ratings inform beneficiaries when choosing plans, influencing their decision-making process. Lower ratings could mean reduced federal payments, leading to fewer supplemental benefits and higher out-of-pocket costs.

Alignment is pushing for a complete recalculation of its 2027 star ratings, with the financial stakes continuing into 2028, affecting the payments then. An even higher courtroom victory for Alignment could see restored bonus payments without confirming improvements in patient care.