Judge Dismisses Humana’s Medicare Advantage Star Ratings Lawsuit Against Cms

A federal judge has dismissed Humana’s (NYSE: HUM) lawsuit against the U.S. Department of Health and Human Services (HHS) and the Centers for Medicare and Medicaid Services (CMS).

The company filed suit in October 2024, challenging CMS’ Medicare Advantage (MA) quality scores. Humana claimed that the agency acted “arbitrarily and capriciously” in downgrading its ratings, which affect bonus payments and overall revenue. It also described the program’s data and calculations as “dizzyingly complex.” 

On July 18, Texas Judge Reed O’Connor determined that Humana’s lawsuit was premature because it had not yet obtained the results of its CMS appeal. CMS reported that Humana’s appeal was denied six months after the company filed its court complaint.

Initially, the insurer asked for the judge’s decision by December so it could incorporate any updates into its bids for the 2026 contract year.

The lawsuit focused on “enforcing the settled ground rules for agency decision making under the Administrative Procedure Act (APA) – in particular, the CMS duties to follow its own regulations, to put those regulations into practice using reason and logic and to follow common sense protocols concerning data integrity and agency transparency,” according to the court filing.

Humana emphasized that star ratings are crucial for the MA program because they provide agents, brokers and beneficiaries vital information about a plan’s quality, helping them compare plans during yearly enrollment periods.

Humana is one of the largest insurers in the country, with nearly six million Medicare Advantage (MA) members in its health plans. CenterWell is Humana’s provider services arm, which includes home health, pharmacy and primary care.

On Oct. 10, 2024, CMS issued the 2025 star ratings, showing a significant decline in the number of MA plans with high star ratings compared to the previous year. The lawsuit noted that ratings for 2024 had already dropped noticeably, while the number of MA enrollees grew sharply from 15.89% in 2024 to 27.71% in 2025.

Before the release of the ratings, Humana said it participated in CMS’ plan preview periods, where it says it uncovered changes to the agency’s methodology where several measures were “moved abruptly and substantially upward, significantly depressing star ratings.”

“Humana was denied an opportunity to determine why the measure-level cut points moved so suspiciously in the 2025 scores or to validate the accuracy of CMS’ calculations. Despite that CMS’ own regulations call for disclosure to MA plan sponsors of the data underlying CMS’ star ratings calculations, the agency refused to share information necessary for Humana to verify the agency’s work in time to make corrections,” the lawsuit read.

Humana’s stock dropped by 3% following the judge’s decision, and Bloomberg analysts estimate it could lose between $1 billion and $3 billion in 2026 due to lower government reimbursements linked to reduced ratings. 

The lawsuit was dismissed without prejudice, allowing Humana to potentially pursue further legal action.

“The decision indicated the court lacks jurisdiction to hear the case as Humana had not exhausted the optional administrative appeals process at the time of filing,” a Humana spokesperson said in a statement. “However, as of today, we have exhausted the administrative appeals process with CMS. We will explore all available legal options, which could include either an appeal of [the court] order or a refiling of the lawsuit.”

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