Alignment Healthcare is suing the Centers for Medicare and Medicaid Services (CMS) over its 2027 Medicare Advantage star ratings, which fell from 98% of members in plans rated at least four stars in 2026 to 25% in 2027.
The decline could cost Alignment more than $200 million in payments for 2028, according to the complaint filed in a D.C. district court. The company is asking the judge to vacate the 2027 ratings and to require the agency to recalculate them with a methodology it deems more favorable.
Background on the Lawsuit
Alignment’s filing contends that the stars methodology is illegal because it was not issued through the formal rulemaking process. It further argues that the agency’s practice of adjusting the methodology in technical notes, rather than via notice-and-comment rulemaking, violates the Administrative Procedure Act.
The case may precede additional actions from other insurers dissatisfied with their quality scores, which range from one to five stars and affect bonuses and competitive positioning in the privatized Medicare program. The agency has revised ratings for at least one insurer in each of the past three years after courts ruled that the department was handling star calculations improperly.
Recent Precedent
A Georgia court this spring took issue with twenty of the agency’s star-rating measures, finding that ten exceeded statutory authority and another ten were procedurally invalid because they were not implemented through regulation. After that decision, CMS recalculated 2026 star ratings for Medicare Advantage insurers without the first ten measures, but it left the second ten in place for every carrier except Clover Health, the plaintiff in that suit.
Alignment is using the same legal theory to challenge its 2027 results, asserting that the continued reliance on the disputed measures raises the same legal question as its pending challenge to the 2026 ratings. The insurer asked the agency on Oct. 6 to determine its 2027 stars without the contested measures; the request was denied on Oct. 7, and the final ratings were released on Oct. 8.
As the litigation moves forward, it could affect the broader Medicare Advantage program, which serves millions of beneficiaries nationwide. Quality scores play a major role in shaping payments to carriers, and any alteration to the scoring system may have wide-reaching effects.
