The Centers for Medicare and Medicaid Services is facing an unusually heavy load of litigation on three fronts: a wave of Medicare Advantage insurer lawsuits over star ratings, a transparency challenge to its new artificial intelligence prior authorization pilot, and continuing obligations under older settlements that shape how Medicare coverage decisions are made. Recent CMS lawsuits have produced mixed results, with some insurers winning recalculations worth hundreds of millions of dollars while others have had their claims thrown out.
Why Insurers Are Suing Over Star Ratings
The Medicare Advantage star ratings program, created by the Affordable Care Act, scores plans from one to five stars on quality measures. Plans that hit four stars or higher qualify for bonus payments from the federal government, which they use to lower premiums or add benefits like dental and vision. Those bonuses reached at least $12.7 billion in 2025 and have paid out at least $87 billion since 2015.1KFF. Medicare Advantage Quality Bonus Payments
The money makes small scoring changes enormously consequential. A drop of half a star can cost an insurer hundreds of millions in lost bonuses, plus enrollment and reputational damage. Average ratings across the program have been sliding, from 4.37 in 2022 to 3.92 in 2025, after CMS raised the performance thresholds and removed certain pandemic-era adjustments.2Becker’s Payer Issues. Lawsuits Over Medicare Advantage Star Ratings Pile Up
More than a dozen insurers have gone to court since 2023. The legal theory is almost always the same: that CMS violated the Administrative Procedure Act by acting arbitrarily and capriciously in how it calculated a rating. The specific grievances vary. Some involve statistical methodology, such as how CMS applied the Tukey Outer Fence Outlier Deletion Method for removing extreme data points. Others involve single “secret shopper” test calls that were marked as failures. Others involve refusals to grant disaster waivers, treatment of merged contracts, or rounding decisions at the sixth decimal place.
How the Star Ratings Cases Have Gone
Results have split. Several insurers won recalculations after showing CMS deviated from its own methodology.
SCAN Health Plan was among the first to prevail. On June 3, 2024, Judge Carl J. Nichols of the U.S. District Court for the District of Columbia found CMS had misapplied the Tukey method and barred the agency from using SCAN’s original 2024 rating for bonus payments, protecting roughly $250 million.3Healthcare Dive. SCAN Health Plan Medicare Advantage Star Ratings Lawsuit4SCAN Health Plan. SCAN Health Plan Prevails in Star Ratings Lawsuit Against CMS
UnitedHealthcare followed with a win on November 22, 2024, when Judge Jeremy Kernodle of the Eastern District of Texas ruled that a single miscoded test call to a shared call center violated the APA and ordered CMS to recalculate and republish the ratings on Medicare Plan Finder. CMS filed a notice of appeal, then withdrew it in late January 2025 without explanation.5Fierce Healthcare. UnitedHealthcare Wins Star Ratings Lawsuit Requiring CMS Recalculate Results6Healthcare Finance News. CMS Withdraws Appeal of UnitedHealth’s Star Ratings Lawsuit Centene raised a nearly identical test-call complaint in Missouri and reportedly saw CMS recalculate its rating.7Fierce Healthcare. Centene Sues CMS Over Star Ratings8Mintz. Medicare Advantage and Part D Programs
Elevance Health won on one contract when Judge Randolph Moss ordered a recalculation for Anthem Blue Cross Blue Shield of Georgia, but its second lawsuit, over a contract that missed the four-star cutoff by rounding at the sixth decimal, was dismissed with prejudice on August 18, 2025 by Judge Mark Pittman, who wrote that federal courts were not well-suited to second-guess the rating system when a plan fell “a hair’s breadth short” of the next tier.9Becker’s Payer Issues. Elevance Health Gets Partial Victory in Star Ratings Lawsuit10Becker’s Payer Issues. Elevance Loses Medicare Advantage Star Rating Challenge
Alignment Healthcare drew a partial win in June 2025 when Judge Christopher Cooper ordered a recalculation for one plan whose score improperly counted two member appeals, but the court rejected the insurer’s broader challenges to the Tukey method and alleged bias against smaller plans. Alignment has appealed the rejected claims.11Healthcare Dive. Alignment Healthcare Medicare Advantage Star Ratings Case Win
Losses have been just as common. Humana’s challenge to a 3.5-star rating that analysts estimated could cost more than $1 billion was dismissed twice by Judge Reed O’Connor of the Northern District of Texas, first for failing to exhaust administrative appeals, then with prejudice in October 2025 after the court found CMS’s no-callbacks policy legal and its methodology not arbitrary. Humana has appealed.12Healthcare Dive. Humana Medicare Advantage Star Ratings Lawsuit Dismissed Again13Becker’s Payer Issues. CareFirst BCBS Sues Over Medicare Advantage Star Ratings Florida Blue lost its challenge to CMS’s refusal to issue a disaster waiver for April 2023 Broward County flooding. BCBS Massachusetts lost a challenge to case-mix adjustments and weighted national averages on November 3, 2025, on a roughly $35 million dispute.14Fierce Healthcare. Florida Blue’s Plan Rebuffed in CMS Star Ratings Challenge15Becker’s Payer Issues. BCBS Massachusetts Loses Medicare Advantage Star Ratings Challenge
Other suits remain live. Blue Cross Blue Shield of Louisiana is challenging how CMS handled data from merged contracts. Zing Health, whose contract CMS moved to terminate over three consecutive 2.5-star ratings and later retracted, filed a second suit in November 2025 seeking a public acknowledgment of CMS’s errors and compensation for more than $200 million in claimed losses.16Becker’s Payer Issues. Zing Health Sues CMS Over Medicare Advantage Contract Termination CareFirst Advantage sued on January 20, 2026 over CMS’s use of corrected patient safety data released after the plan preview period had closed, alleging a rating drop that cost an estimated $32 million.13Becker’s Payer Issues. CareFirst BCBS Sues Over Medicare Advantage Star Ratings
The Clover Health Ruling
The most far-reaching decision came in Clover Health’s case. On May 27, 2026, Judge Lisa Godbey Wood of the U.S. District Court for the Southern District of Georgia partially granted Clover’s motion for summary judgment on a rating drop the insurer said cost roughly $120 million. The court found CMS had improperly included 20 measures in the calculation: ten that relied on data outside the agency’s statutory authority for quality improvement, and ten that had been adopted without required notice-and-comment rulemaking.17Becker’s Payer Issues. Clover Beats CMS in Medicare Advantage Star Ratings Lawsuit The court entered final judgment on May 29, 2026 after partially granting reconsideration.18PACER Monitor. Clover Insurance Company v. Department of Health and Human Services et al
The ruling technically applies only to Clover. But legal observers noted it could give other insurers a template to attack the statutory and procedural underpinnings of the star ratings program itself, not just individual scoring errors.19Mintz. Clover Health Decision Raises Significant Questions for CMS CareFirst asked for a two-week hold on its own case in June 2026 in the aftermath of the Clover ruling, and the court granted it.20Georgetown Law Litigation Tracker. CareFirst Advantage PPO Inc. v. Department of Health and Human Services et al CMS may appeal to the Eleventh Circuit.
The WISeR AI Prior Authorization Suit
A separate lawsuit targets CMS’s new use of artificial intelligence to review prior authorization requests. The Wasteful and Inappropriate Service Reduction Model, or WISeR, launched January 1, 2026 as a six-year pilot in Arizona, New Jersey, Ohio, Oklahoma, Texas, and Washington. Six technology vendors review requests for services considered vulnerable to fraud, waste, and abuse, including skin and tissue substitutes and electrical nerve stimulator implants. Vendors are paid a percentage of the Medicare spending they avert, up to 20%. CMS requires that licensed clinicians validate any recommendation to deny payment.21CMS. WISeR Model
Critics have questioned the vendors’ financial incentive to deny care, the opacity of the underlying AI, and the risk that algorithmic bias could deepen health disparities. In July 2025, Representatives Alexandria Ocasio-Cortez, Lloyd Doggett, and 40 colleagues urged CMS to halt the model.22Georgetown University Health Policy Institute. New CMS WISeR Model Revives Concerns of Prior Authorization and Artificial Intelligence
On March 25, 2026, the Electronic Frontier Foundation filed a Freedom of Information Act suit against CMS in the Northern District of California seeking records on the program’s design, vendor agreements, bias testing, audit reports, and performance data. EFF had filed the underlying FOIA request on January 29, 2026; CMS acknowledged it in February but produced no responsive records by the statutory deadline. EFF cited early data suggesting that AI approval rates in Texas were lower than those of Medicare Advantage plans, and that 62% of AI-denied claims were approved on human review. The case is active.23EFF. EFF v. CMS24Fierce Healthcare. Nonprofit Electronic Frontier Foundation Sues CMS Over AI Prior Authorization
The Matrix and HealthFair Fraud Settlement
CMS is not always the defendant. In a major enforcement action announced June 3, 2026, the Department of Justice settled False Claims Act allegations against Community Care Health Network (doing business as Matrix Medical Network), DPN USA (doing business as HealthFair), and HealthFair founder Shahriah “James” Ekbatani for $56.5 million. The government alleged the companies caused Medicare Advantage organizations to submit false or invalid diagnosis codes to CMS, inflating risk-adjustment payments.25DOJ. Matrix, HealthFair, and HealthFair Founder Agree to Pay $56.5M to Resolve False Claims Act Allegations
Matrix, which provided in-home assessments under contract with more than 30 Medicare Advantage plans, allegedly reported unsupported diagnoses for chronic conditions like atrial fibrillation, rheumatoid arthritis, and COPD between 2014 and 2019 while marketing its ability to identify codes that would boost risk-adjustment payments. HealthFair allegedly reported more extreme unsupported diagnoses, including HIV/AIDS and metastatic cancer, sometimes based only on patient self-reports or contradicted by diagnostic tests. Matrix will pay $36.5 million, HealthFair $5 million, and Ekbatani $15 million. Matrix admitted its assessment forms often lacked clinical support for reported diagnoses and entered a five-year Corporate Integrity Agreement with the HHS Office of Inspector General. Two whistleblowers will share $10.9 million.26DOJ. United States Announces $36.5 Million Settlement in Medicare Fraud Lawsuit Against Matrix
The Jimmo Settlement Still Governs Coverage Decisions
An older settlement continues to shape day-to-day Medicare decisions. In Jimmo v. Sebelius, a class action by the Center for Medicare Advocacy and Vermont Legal Aid, beneficiaries challenged the practice of denying Medicare coverage for skilled nursing and therapy services whenever a patient was not expected to improve. The settlement, approved on January 24, 2013, established that Medicare covers skilled care needed to maintain a patient’s condition or slow deterioration, whether or not improvement is expected. The maintenance coverage standard applies across fee-for-service Medicare, accountable care organizations, and Medicare Advantage.27CMS. Jimmo Settlement28CMS. Jimmo Settlement FAQs
Compliance has been uneven. In February 2017, Judge Christina Reiss of the U.S. District Court in Vermont found CMS in breach of the settlement because incorrect denials based on the old improvement standard were still occurring, and ordered a corrective action plan with additional manual revisions, a dedicated CMS web page, and training for contractors and adjudicators. As recently as December 2021, CMS was still issuing reminders that skilled maintenance care is covered.29Center for Medicare Advocacy. Improvement Standard
What the Lawsuits Are Changing
CMS has adjusted the star ratings program during the litigation wave, though the agency has not tied the changes directly to any case. For 2026, CMS reduced the weight of patient experience and access measures from four to two, added a kidney health evaluation measure, and ended some pandemic-era disaster adjustments.30CMS. Star Ratings Fact Sheet The Contract Year 2027 final rule, published April 6, 2026, went further: CMS eliminated 13 measures across two rating periods, including some call center and appeals measures that had been frequent litigation targets, added a depression screening measure, and reverted to a historical reward factor after concerns that a proposed Health Equity Index would disadvantage smaller and regional plans. CMS estimated the changes would shift roughly $18.5 billion over ten years.31Reed Smith. CMS Makes Structural Changes to Star Ratings System for Medicare Advantage and Part D
The Clover ruling is the wild card. If other insurers use its reasoning to challenge measures that CMS adopted without notice-and-comment rulemaking or that rely on data outside the agency’s statutory authority for quality improvement, the litigation could reach beyond individual scoring disputes into the design of the program itself. On the AI front, the EFF case will test how much of the WISeR model CMS has to disclose. And Jimmo shows that even a settled case can require years of continuing enforcement before Medicare’s day-to-day decisions catch up with what a court ordered.