An insurer for Medicare Advantage has filed a lawsuit against the Trump administration, challenging the federal regulators’ calculations for 2027 star ratings. Alignment Healthcare claims the process could lead to a financial loss of hundreds of millions of dollars. The lawsuit, filed in Washington, D.C., targets the Centers for Medicare & Medicaid Services (CMS) over their recent quality ratings for Medicare Advantage.
The Allegations
Alignment Healthcare argues that CMS used measures not properly established through the federal rulemaking process. Alignment’s complaint states, “CMS has used the same ten measures in calculating Alignment’s 2027 Star Ratings without promulgating them ‘by regulation,’ as Congress required.” This lawsuit follows a pending challenge to the 2026 Star Ratings. Alignment claims the continued use of these measures poses the same legal questions.
Financial Implications
The dispute has significant financial stakes for Alignment. The company estimates the lower ratings could lead to a loss exceeding $200 million in 2028. Ratings range from one to five stars and aid in comparing the quality of Medicare Advantage plans. These ratings also determine eligibility for quality bonus payments. A change by even a half-star can have major financial consequences. Alignment experienced such a drop, moving from four to 3.5 stars, with potential implications on payments.
Background and Broader Context
CMS issued the 2027 star ratings on October 8. Reports indicate a significant drop in the proportion of Alignment members in plans rated four stars or higher—from 98% in 2026 to 25% in 2027. “The substantial decline prompts questions about the consistency, transparency, and accuracy of the government’s evaluation,” said Alex Beene, a financial literacy expert.
Alignment operates in five states and seeks judicial intervention to set aside the 2027 ratings. They request a recalculation excluding disputed measures. Central to this case is the claim that CMS used “technical notes” instead of a formal rulemaking process, violating the Administrative Procedure Act. A company spokesperson stated, “The relief sought aligns with other litigation and maintains CMS’s measures do not meet legal requirements or accuracy.”
Legal Precedent and Current Claims
Previously, a federal court in Georgia addressed measures used in star ratings. Ten measures were outside CMS’s authority while another ten were procedurally invalid. CMS recalculated 2026 ratings but continued the disputed methods in 2027. Michael Ryan, a finance expert, commented, “CMS used rating measures without necessary rulemaking, posing a significant legal question.” The Trump administration’s appeal in a related case involving Clover Health remains unresolved.
Alignment asserts CMS’s method diverged from Congress’s intent for the rating system. They stated, “Star Ratings allow informed decisions based on clinically validated, regulated measures,” suggesting the current approach fails this vision.
Impact on Medicare Beneficiaries
The lawsuit involves the grading of plans and potential reductions in payments through the Medicare Advantage payment system. Star ratings impact beneficiaries by helping compare plans and affecting insurers’ eligibility for federal payments. Beene remarked, “The main concern is for seniors relying on these plans, as reduced federal payments could mean fewer benefits and higher costs.”
Moving Forward
Alignment aims to have 2027 ratings recalculated. Financial implications will extend into 2028 when payments are affected. Ryan added, “A legal win might restore bonus payments but doesn’t prove better care.” Medicare beneficiaries should learn what aspects improved or declined before choosing sides.