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June 04, 2024 05:00 AM


SCAN WINS MEDICARE ADVANTAGE STAR RATINGS LAWSUIT AGAINST CMS

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SCAN Health Plan has prevailed in a widely watched federal lawsuit brought last
year against the Centers for Medicare and Medicaid Services that alleged
regulators did not appropriately calculate the insurer's Medicare Advantage star
rating.

Judge Carl J. Nichols, of the U.S. District Court for the District of Columbia,
on Monday sided with SCAN and wrote that regulators violated the Administrative
Procedure Act when calculating the company’s star ratings scores last year.

Related: Why Medicare Advantage carriers are suing CMS over star ratings



The decision could have industrywide implications for the star ratings program
if regulators decide to recalculate all carriers’ star scores for the 2024 plan
year. The ruling could also affect several pending cases filed by other insurers
against CMS. It also could be appealed.



CMS and the Health and Human Services Department did not immediately respond to
interview requests. 

The case centered on CMS' review of insurers’ performance in several quality
metrics through its star ratings program and the ratings it issues that are
based on a curve. The difference between a high and low rating depends on how an
insurer compares against its rivals and that can change annually. At issue is
how regulators went about removing outlier plans from comparison last year
through a statistical update known as the Tukey Outer Fence Outlier Deletion
Method. 



CMS had said since 2020 that it was going to apply Tukey to plan scores
beginning in 2023. In 2022, the Tukey provisions were left out of a rule
outlining how CMS planned to calculate star scores for the coming year. CMS
added the provisions to the preamble of the rule a few months after they were
omitted, and cited an input error for the discrepancy. The industry has dubbed
the controversy “TukeyGate.” 

SCAN alleged the text of the preamble is not legally binding and CMS did not
follow the appropriate rulemaking process. The company alleged that because CMS
did not follow the appropriate process when calculating the insurer’s star
ratings, SCAN’s score fell from 4.5 to 3.5, which cost the company more than
$250 million in quality bonus payments. CMS awards Medicare Advantage carriers
that earn at least four out of five stars a big bonus payment, which companies
rely on to finance supplemental benefits and zero-premium plans for members. 

CMS “appears to argue that any statement in a preamble that goes through notice
and comment and that is clearly intended to be binding is a legislative rule
with the force of law. But that is not the law in this circuit,” Nichols wrote.

The court’s decision validates that CMS’ methodology was outside of what was
stipulated in rulemaking, SCAN Group CEO Sachin Jain wrote in a text message to
Modern Healthcare. 

“The judge’s ruling asks that CMS recalculate our ratings and we are hopeful
that this will lead to a higher star rating and the ability for SCAN to maintain
its strong benefits for members in our service areas,” Jain wrote. 

Insurers’ Medicare Advantage contract bids for the 2025 plan year were due to
CMS Monday. The insurer anticipates receiving an additional $280 million if it
receives a new rating of at least four stars for the 2024 plan year. 

Insurers Elevance Health, Hometown Health Plan and Zing Health have sued CMS in
recent months, making similar allegations. Efforts to reach the companies late
Monday were unsuccessful. 



RELATED ARTICLES

Why Medicare Advantage carriers are suing CMS over star ratings
TukeyGate: Insurers vexed by Medicare Advantage star ratings declines
Elevance nabs $190M in Medicare Advantage star ratings revision
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