The high-stakes battle for Medicare Advantage (MA) supremacy has shifted from the marketplace to the courtroom. Elevance Health, one of the nation’s largest health insurance providers, has officially filed a lawsuit against the U.S. Department of Health and Human Services (HHS) and the Centers for Medicare & Medicaid Services (CMS). The core of the dispute centers on the calculation of 2026 Medicare Advantage Star Ratings, with Elevance alleging that the federal government is applying a "double standard" that unfairly prejudices its competitive position.
The lawsuit comes in the wake of a recent judicial victory for competitor Clover Health, which forced CMS to recalculate its star ratings after a federal judge found the agency’s methodology to be legally and procedurally flawed. Elevance is now demanding that the same remedial logic be applied to its own contracts, arguing that CMS cannot selectively enforce regulatory standards to benefit one firm while ignoring the legal deficiencies applied to another.
The Crux of the Dispute: Equity vs. Regulatory Discretion
At the heart of this legal challenge is the Medicare Advantage Star Rating system, a critical mechanism used by CMS to assess the quality and performance of private Medicare plans. These ratings, which range from one to five stars, are not merely administrative scores; they are the financial lifeblood of MA plans. High-performing plans (typically those with four stars or higher) are eligible for Quality Bonus Payments (QBPs) and are permitted to offer "enhanced benefits"—such as lower premiums, dental coverage, or vision care—that are subsidized by the federal government.
In the case of Clover Insurance v. HHS, a federal judge ruled that CMS had improperly utilized 20 specific quality measures—including metrics related to medication adherence and call center performance—when calculating the 2026 Star Ratings. The court determined that the agency had relied on unauthorized data sources and failed to adhere to mandatory public rulemaking procedures. Following this ruling, CMS was compelled to recalculate Clover’s ratings, resulting in a significant upgrade from 3.5 to 4.5 stars.
Elevance contends that because the court found these 20 measures to be "legally defective," they are inherently flawed for every other MA organization in the country. By refusing to extend the same recalculation methodology to Elevance, the insurer argues that CMS is acting in an "arbitrary and capricious" manner, in direct violation of the Administrative Procedure Act (APA).
Chronology of a Regulatory Standoff
The tensions between major insurers and CMS regarding star ratings have been brewing for years, characterized by a series of legal challenges and administrative disputes.
- 2024 Cycle: Elevance previously challenged its 2024 Star Ratings, securing a partial legal victory that underscored the insurer’s willingness to litigate against the agency.
- 2025 Cycle: A subsequent challenge regarding the 2025 ratings proved unsuccessful, highlighting the difficulty of overturning complex federal regulatory determinations.
- 2026 Cycle (Initial Ratings): CMS released the 2026 Star Ratings, which were met with industry-wide scrutiny. The methodology used by the agency drew immediate criticism from insurers who argued that the inclusion of certain measures lacked sufficient statutory authority.
- The Clover Precedent (Mid-2026): A federal court handed down a ruling in favor of Clover Health, confirming that CMS had bypassed necessary rulemaking processes for 20 quality measures. The court ordered an immediate recalculation of Clover’s ratings.
- The Demand: Following the Clover ruling, Elevance formally petitioned CMS to apply the same recalculation methodology to its own portfolio. CMS denied this request, maintaining that the Clover ruling was specific to the evidence presented in that case.
- The Lawsuit: Last week, having exhausted administrative avenues, Elevance filed its complaint, seeking a court order to compel CMS to treat the 20 defective measures as invalid across the board for the 2026 rating year.
Supporting Data and Financial Implications
The financial stakes of this litigation are immense. Elevance has explicitly stated that the refusal to recalculate its ratings has cost the company approximately $115 million in Quality Bonus Payments. This figure represents the delta between the bonuses currently allocated to Elevance and what the company would receive if the 20 contested measures were stripped from the calculation.
Specifically, the lawsuit identifies five key contracts that are currently rated between 3.0 and 4.0 stars. Should the court side with Elevance, those contracts would be elevated to a 3.5 to 4.5-star range. The implications of this shift are twofold:
- Direct Revenue: The $115 million in immediate QBP revenue would be directly reflected in the company’s bottom line, affecting its quarterly financial reporting and investor outlook.
- Market Positioning: The "four-star threshold" is the gold standard for Medicare Advantage marketing. Plans with four stars or higher receive a larger portion of the rebate dollars from CMS, which they use to lure beneficiaries away from competitors. Elevance argues that by keeping Clover at a higher tier while keeping Elevance at a lower one, CMS is effectively distorting the competitive landscape of the MA market.
The "Arbitrary and Capricious" Argument
Elevance’s legal strategy leans heavily on the Administrative Procedure Act (APA). The insurer argues that CMS’s refusal to apply the Clover ruling to other market participants is inherently irrational.
"CMS cannot rationally maintain that the same methodology is simultaneously legally defective (for Clover, necessitating recalculation) and legally sound (for all other MAOs, justifying no recalculation)," the complaint states.
Legal experts observing the case note that the burden on Elevance will be to prove that there is no "material distinction" between its operations and those of Clover Health regarding these 20 measures. If the court agrees that the deficiency is systemic rather than company-specific, it could force a massive, industry-wide recalibration of 2026 Star Ratings, potentially creating a significant administrative burden for CMS.
Implications for the Future of Medicare Advantage
The outcome of this lawsuit will likely resonate far beyond the financial statements of Elevance Health. It represents a critical test of how much discretion CMS has in interpreting its own performance metrics and whether the judiciary will permit the agency to continue using "siloed" regulatory enforcement.
1. The Precedent for Industry Litigation
If Elevance wins, it could trigger a "floodgate" effect, where dozens of other MA organizations—many of whom are also unhappy with their 2026 ratings—might join in or initiate their own lawsuits. This could effectively paralyze the Star Rating system, forcing Congress or the administration to overhaul how quality metrics are defined and implemented.
2. Impact on Beneficiary Choice
CMS has long argued that the Star Rating system is designed to protect beneficiaries and ensure they have access to high-quality care. However, the agency’s defense is complicated by the fact that if ratings are based on "legally defective" measures, then the information provided to beneficiaries via the "My Plan Finder" tool may be misleading. If beneficiaries are choosing plans based on ratings that the courts have deemed procedurally unsound, the fundamental purpose of the rating system is undermined.
3. CMS Regulatory Authority
The agency is currently under intense pressure to balance the need for rigorous quality control with the necessity of following strict federal rulemaking processes. The criticism that CMS often acts with "arbitrary" power has been a recurring theme in recent healthcare litigation. This case may provide a definitive answer on whether federal health agencies can maintain "business as usual" while facing a judiciary increasingly skeptical of administrative overreach.
Conclusion: A High-Stakes Legal Chess Match
Elevance Health’s lawsuit is more than a request for $115 million; it is a direct challenge to the governance of the Medicare Advantage program. By tying its fate to the precedent set by Clover Health, Elevance has forced a confrontation that CMS cannot easily dismiss.
As the case moves forward, the healthcare industry will be watching closely to see if the court determines that the 2026 Star Ratings were truly the result of flawed methodology or if there is sufficient justification for the disparate treatment of insurers. For now, the battle underscores the growing complexity and litigious nature of the Medicare Advantage marketplace, where regulatory compliance is increasingly decided by judges rather than the agency itself.
With the 2026 enrollment cycle looming, the resolution of this conflict will have immediate and long-term effects on how health insurance plans are marketed, how they are funded, and ultimately, how they serve the millions of Americans who rely on the Medicare Advantage program for their healthcare coverage.
