Star Ratings

CMS’s recent revision of Medicare Advantage Star Ratings made some health insurers, especially CVS Health Corp.’s Aetna, big winners in the eyes of Wall Street. A number of insurers received higher bonus payments from CMS for the 2024 plan year after the revision, and others were able to resubmit their bids for the 2025 plan year on more favorable terms.

The changes are the result of the rulings in lawsuits brought by SCAN Health Plan and Elevance Health, Inc. against CMS. In the SCAN lawsuit, the U.S. District Court for the District of Columbia found that CMS’s failure “to follow its own regulation” resulted in the not-for-profit MA insurer receiving an incorrect 2024 Star Rating, which cost the plan nearly $250 million in quality bonus payments (QBPs) for 2025. That same court also ruled separately that CMS must recalculate Elevance subsidiary Anthem Blue Cross and Blue Shield of Georgia’s Star Ratings.

The Supreme Court’s June 28 rulings overturning the so-called Chevron doctrine could impact federal regulation of multiple industries, including Medicare Advantage, and lead to increased legal challenges to HHS regulations. In a 6-3 decision, the Court ruled on a pair of related cases — Loper Bright Enterprises v. Raimondo and Relentless Inc. v. Dept. of Commerce — that lower courts must “exercise their independent judgment in deciding whether an agency has acted within its statutory authority,” as required by the Administrative Procedure Act (APA). The doctrine stems from a 1984 case, Chevron v. National Resources Defense Council, which dealt with environmental issues but established a legal framework allowing federal agencies such as HHS broad authority to interpret “ambiguous” laws through rulemaking. Without such discretion, the judicial system will have more power to interpret unambiguous rules that face legal challenges, which are common in MA and other highly regulated sectors of health insurance. “We believe the decision will impact the broader legislation process which we view as a positive for healthcare in general,” observed securities analyst Ann Hynes of Mizuho Securities. “HHS and CMS may face difficulties in administering Medicare and Medicaid as tasked by Congress. To ensure the agencies’ interpretations are enforced, Congress would likely need to refine the Medicare and Medicaid statutes to expand the scope of agency authority and address any existing ambiguous language by memorializing the agencies’ interpretations,” warned attorneys from Baker Donelson prior to the ruling. “Without discretion given to the agencies, health care organizations and beneficiaries would have a greater chance of success in bringing litigation against the agencies.”

Given the outcomes of two legal challenges to CMS’s application of a new Star Ratings methodology last year, CMS on June 13 confirmed plans to recalculate the 2024 Star Ratings — and notified all Medicare Advantage organizations of a “limited opportunity” to resubmit their bids for the 2025 plan year. As a result, plans that stand to benefit from the recalculations and their actuaries are now scrambling to get changes into CMS by its June 28 deadline.

In what industry experts agree is an unprecedented situation, CMS’s decision came shortly after the U.S. District Court for the District of Columbia agreed with SCAN Health Plan that CMS’s failure “to follow its own regulation” resulted in the not-for-profit MA insurer receiving an incorrect 2024 Star Rating, which cost the plan nearly $250 million in quality bonus payments (QBPs) for 2025. That same court also ruled that CMS must recalculate Anthem Blue Cross and Blue Shield of Georgia’s Star Ratings. Elevance Health, Inc., the parent company of the Anthem Georgia plan, filed a lawsuit against HHS in December and disclosed in March that CMS had updated its original ratings, which will lead to an additional $190 million in revenue for plan year 2025. SCAN filed a similar suit in December.

In light of recent court rulings, CMS said in a memo released on June 13 that it plans to recalculate the 2024 quality ratings of Medicare Advantage plans. Earlier this month, SCAN Health Plan won a legal challenge to CMS’s calculation of the 2024 Star Ratings in the U.S. District Court for the District of Columbia. That same court also ruled that CMS must recalculate Anthem Blue Cross and Blue Shield of Georgia’s MA Star Ratings. Elevance Health, Inc., the parent company of the Anthem Georgia plan, disclosed in March that CMS had updated its original ratings, which will lead to an additional $190 million in revenue for plan year 2025. In its memo, CMS wrote that it has recalculated the 2024 Star Ratings — which determine 2025 quality bonus payments (QBP) — using the published 2023 Star Ratings cut points. “We have assigned all contracts the recalculated 2024 overall and/or summary Star Ratings if those recalculated ratings result in higher QBP Ratings than what was previously assigned based on the contract’s overall and/or summary 2024 Star Ratings that were released in October 2023,” the agency said.

SCAN Health Plan won a legal challenge to CMS’s calculation of the 2024 Star Ratings that could have major implications for quality bonus payment (QBP) outlays and 2025 cut point generation. According to a June 3 memorandum opinion filed in the U.S. District Court for the District of Columbia, Judge Carl Nichols agreed with the not-for-profit Medicare Advantage insurer that CMS “failed to follow its own regulation,” which resulted in SCAN receiving an incorrect Star Rating. In a lawsuit filed against HHS in December, SCAN argued that CMS was “arbitrary and capricious” when it applied new guardrails (i.e., restricting the movement of cut points by no more than 5% in either direction) to hypothetical cut points for the previous year rather than actual cut points, yet did not amend its regulations to reflect that decision. Nichols agreed that the “best and most natural reading” of CMS’s so-called Guardrail Rule was that it referred to actual cut points in both the initial year and the following year, and he granted the plaintiff’s motion for summary judgment. SCAN, which serves roughly 277,000 MA enrollees in five states, had a 4.5 Star Rating for six consecutive years until 2024, when it received a 3.5 Star Rating, costing it nearly $250 million in lost quality bonus payments. Elevance Health, Inc. in December filed a similar lawsuit; the insurer in March disclosed that CMS “updated” its original ratings, which will lead to an additional $190 million in revenue for plan year 2025. MA insurers Hometown Health Plan and Zing Health also have similar suits pending, reported Modern Healthcare.

President Joe Biden’s fiscal year 2025 budget proposal included a familiar item from the previous year: a proposal to establish new medical loss ratio (MLR) requirements for supplemental benefits in Medicare Advantage. Without an estimated economic impact or additional detail, that proposal was included as a line item in the 188-page document released by the White House Office of Management and Budget. According to a March 11 fact sheet on the budget, the administration also aims to build on recent efforts to improve prescription drug affordability by accelerating the pace of Medicare drug price negotiations, expanding the Inflation Reduction Act’s inflation rebates and $2,000 out-of-pocket cap beyond Medicare and into the commercial market, and extending the IRA-established $35 cost-sharing limit for Medicare-covered insulin to the commercial sector. Further, the budget seeks to strengthen Medicare by “modestly increasing” the Medicare tax rate on incomes above $400,000, and it “directs an amount equivalent to the savings from the proposed Medicare drug reforms” into the Medicare Hospital Insurance trust fund.

President Joe Biden’s health care agenda figured prominently in his State of the Union address on March 7. Regarding the Inflation Reduction Act, the president said he wants to increase the number of drugs subject to Medicare price negotiations to 50 per year, up from 20 under current law. Biden also said he wants to expand the IRA’s $2,000 annual out-of-pocket cost cap for prescription drugs and $35 monthly copay cap for insulin to commercial plans, as they currently only apply to Medicare Part D. Additionally, the president vowed to defend the Affordable Care Act from repeal attempts and make the expanded subsidies that are set to expire after 2025 permanent.

The White House on March 5 unveiled a “strike force” aimed at cracking down on unfair and illegal pricing, focusing on sectors including prescription drugs and health care, food and grocery, housing, and financial services. Set to be chaired by the Dept. of Justice and Federal Trade Commission, the strike force “will strengthen interagency efforts to root out and stop illegal corporate behavior that hikes prices on American families through anti-competitive, unfair, deceptive, or fraudulent business practices,” the Biden administration said. The White House simultaneously announced that its Competition Council will soon unveil new actions aimed at slashing credit card late fees, combating high internet costs and supporting small farmers; previously, the council helped drive HHS actions such as cracking down on problematic Medicare Advantage marketing practices.

Starting with the 2027 Star Ratings, CMS will begin rewarding Medicare Advantage plans for their efforts to assess social risk factors and address disparities in certain quality measures with the new Health Equity Index (HEI). Not all plans will qualify and only a third of top-performing plans will be rewarded, but the time is now for plans to look at how they are doing on the claims-based measures that will be impacted and how they are performing for members with one of the qualifying factors (i.e., eligible for Medicare and Medicaid, disability and/or the Part D low-income subsidy).

During a recent panel moderated by AIS Health, a division of MMIT, speakers at the 7th Annual Medicare Advantage Leadership Innovations forum discussed best practices for assessing members’ social needs and how plans can use data to address them and move the needle forward on health equity.

Each year, AIS Health does a deep dive into the enrollment shifts that took place regionally and nationally over the Medicare Annual Election Period (AEP) and explores the myriad drivers of growth (or attrition). From benefit enhancements to creative new partnerships, three AEP leaders disclose details of their winning strategies to AIS Health, a division of MMIT.

From October 2023 to February 2024 — which reflects the full capture of lives enrolled during the AEP, which ran from Oct. 15 through Dec. 7 — CVS Health Corp.’s Aetna increased its MA enrollment by 18.9% and grabbed roughly half of all new enrollment in individual plans, including Dual Eligible Special Needs Plans (D-SNPs). Aetna significantly grew its geographic footprint in both segments, maintained stable provider networks, and on average, featured lower premiums, maximum out-of-pocket costs and drug deductibles in its non-SNP plans.

More than a year after unveiling their intent to form HealthRight Group, SCAN Group and CareOregon have abandoned their plans to combine. According to news reports, the parties called off their proposed combination on Feb. 13 after the Oregon Health Authority twice delayed offering a recommendation on whether to approve the deal, which would have created a $6.8 billion Medicaid and Medicare Advantage insurer. “SCAN and CareOregon share a commitment to preserving and protecting nonprofit, locally based healthcare and that has always been our goal in combining under the HealthRight Group,” said SCAN, the parent company of not-for-profit Medicare Advantage insurer SCAN Health Plan. “Our intent in coming together was to support Oregon’s healthcare system and the people that CareOregon serves. However, despite our efforts, there are still questions about our combination. As a result, SCAN Group and CareOregon have mutually agreed to withdraw our applications with the Oregon regulatory agencies and to terminate our affiliation agreement.” SCAN and CareOregon, which serves Medicare and Medicaid enrollees in Oregon, in December 2022 told AIS Health, a division of MMIT, that the partners aimed to be a “formidable not-for-profit partner” in the government program space.