THE ARISING · Markets & Strategy
Humana Wins and Alignment Threatens to Sue as 2027 Medicare Advantage Star Ratings Land
Humana is the biggest winner in the federal government's new quality ratings for Medicare Advantage insurers, according to STAT. Alignment Healthcare, which was downgraded, has threatened to sue.
The Centers for Medicare and Medicaid Services (CMS) released the 2027 star ratings this month. According to CMS, nearly 71% of Medicare Advantage enrollees are currently in a plan that will have at least four out of five stars for quality.
The ratings matter because of money. Plans that reach at least four stars receive bonus payments, which total $13 billion a year across the industry, according to STAT. Ratings for 2027 produce payouts in 2028. An insurer's grade this fall therefore shapes its revenue a year or more ahead.
STAT also reports that the quality measures come with tens of billions of dollars in extra revenue for the highest-performing plans. That gives insurers a strong reason to compete on ratings and to fight results they dislike.
Alignment Healthcare has already said it may take legal action over its downgrade. STAT describes this as a now-common response from almost any insurer unhappy with its grades.
Our reading: the star system works as both a quality scorecard and a revenue lever. That makes a rating change a competitive event. A gain can help a company's position against rivals. A loss can cut bonus income. Repeated lawsuits add another risk, because final ratings may not stay settled.
STAT also reports deep uncertainty around the quality measures themselves. The available excerpt does not give insurer-by-insurer scores, so the size of each company's gain or loss is not yet clear from it.
What to watch next
Whether Alignment files its lawsuit, whether other insurers challenge their grades, and how Humana and its rivals estimate the effect on their 2028 bonus payments.
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