On May 27, 2026, a federal district court granted partial summary judgment for Clover Insurance Company (“Clover”), holding that CMS exceeded its statutory authority in calculating ten Star Ratings measures and separately failed to satisfy notice-and-comment rulemaking requirements for ten other measures. Clover Ins. Co. v. Dep’t Health & Hum. Servs., 2:25-cv-00142 (S.D. GA May 27, 2026). Because plans with higher Star Ratings receive enhanced payments, Clover alleged that the challenged ratings deprived it of approximately $120 million in quality bonus and related payments that it would have received with a four-star rating. Although this decision is limited to Clover, CMS subsequently announced that it voluntarily recalculated quality bonus payment ratings for all Medicare Advantage Organizations (“MAOs”) using only Healthcare Effectiveness Data and Information Set (“HEDIS”), Consumer Assessment of Healthcare Providers and Systems (“CAHPS”), and Health Outcomes Survey (“HOS”) data.
Overview
The Clover decision rests on two independent legal theories—each disposing of a different set of ten measures—and the court expressly declined to reach several of Clover’s remaining claims as moot. The decision departs from prior Star Ratings litigation, in which courts only entertained challenges to how CMS applied its measures, not whether it had authority to use them in the first place. After the decision, CMS recalculated Clover’s 2026 Star Rating to 4.5 Stars, two full tiers above the 3.5 Stars it previously had been assigned and half a star higher than the four stars Clover originally requested. Other plaintiffs are taking notice and seeking pauses in their own proceedings to assess the ruling’s implications.
Inside the Court’s Ruling
The court’s decision came in two parts, addressing two separate sets of measures. First, it held that CMS lacked statutory authority to use ten of the disputed measures.[1] Specifically, the court held that CMS may only use the data types covered in 42 U.S.C. § 1395w-22(e) to determine a plan’s Star Rating.[2] This effectively limits CMS to using HEDIS, HOS, and CAHPS as types of data sets. Because ten of the disputed measures used data other than those prescribed in § 1395w-22(e), the court invalidated the measures as applied to Clover. Notably, however, the court rejected Clover’s argument that CMS was limited to the exact survey questions in use as of November 1, 2003, holding instead that the overarching categories within HEDIS, HOS, and CAHPS systems must stay the same but not the specific questions themselves.
Second, and on independent grounds, the court found that CMS failed to follow statutory notice and comment rulemaking procedures before adopting ten different disputed measures.[3] Because Star Ratings constitute policy statements that change a substantive legal standard governing payment for services—specifically, the quality bonus payment rebate percentage a plan receives—CMS must undergo notice and comment before using those measures for Star Ratings calculations. Its failure to do so rendered these ten measures procedurally invalid as applied to Clover. Clover additionally raised regulatory notice and comment and non-delegation doctrine challenges, but the court declined to consider those challenges.
However, the court rejected Clover’s argument that CMS violated 42 U.S.C. § 1395w-22(e)(3)(B)(i) by relying on post-2003 types of data. The court held that CMS must remain within the HEDIS, HOS, and CAHPS systems and their broad substantive data categories as they existed in 2003 but may update specific survey questions within those categories over time. Applying that standard, the court held that two disputed measures tracked the same systems and substantive data categories as the 2003 surveys and therefore did not run afoul of the statutory limitations.
Accordingly, the court set aside Clover’s 2026 Star Rating and ordered CMS to recalculate it in a manner consistent with the opinion.
A New Kind of Challenge
Clover departs from prior Star Ratings rulings, where courts only accepted challenges based on CMS’s failures to follow its own guidelines. Clover successfully challenges CMS’s authority to use certain measures in the first place and the procedures CMS must follow to use them rather than how CMS used the measures.
For example, the U.S. District Court for the Eastern District of Texas found CMS’s decision to lower UnitedHealth’s Star Rating arbitrary and capricious because CMS ignored its own test call evaluation guidelines. Specifically, CMS failed to invalidate a test call where the test caller never asked the required introductory question, contrary to CMS guidelines. UnitedHealthcare Benefits of Texas, Inc. v. Centers for Medicare & Medicaid Servs., No. 6:24-CV-357-JDK, 2024 WL 4870771 (E.D. Tex. Nov. 22, 2024).
Conversely, the U.S. District Court for the Northern District of Texas rejected Humana when it made arguments similar to Clover’s. Instead, the court found that CMS’s no-callback policy did not require notice and comment rulemaking because quality bonus payments tied to Star Ratings are not payments for services, and Star Ratings are not minimum standards. Humana Inc. v. U.S. Dep’t of Health & Hum. Servs., 806 F. Supp. 3d 642 (N.D. Tex. 2025), appeal docketed, No. 25-11302 (5th Cir. Nov. 25, 2025). Notably, Humana filed a notice of supplemental authority citing Clover on June 2, 2026, and the appeal is pending argument.
Implications and Next Steps
Although the Clover decision applies solely to Clover itself, its implications are already being felt in ongoing Medicare Advantage Star Rating litigation. In addition to Humana’s pending appeal in the Fifth Circuit, on June 8, 2026, CareFirst Advantage PPO asked the U.S. District Court for the District of Columbia to pause its proceedings for two weeks to give CMS time to assess the ruling and determine whether industry-wide remedial action is warranted.
The pause proved productive. On June 17, 2026, CMS announced it would voluntarily recalculate Star Ratings for every MAO using only the data categories authorized in 42 U.S.C.
§ 1395w-22(e), that is, only using HEDIS, HOS, and CAHPS data. CMS would hold harmless MAOs that would receive a lower score under this revised methodology. CMS, however, reserved the right to appeal Clover and clarified that the recalculations should not be taken as a definitive policy. Additionally, CMS provided MAOs the option to resubmit their CY 2027 bids using the recalculated 2027 quality bonus payment rating, but MAOs had to notify CMS of their intention to do so no later than 11:59 PM PDT on June 22 with bid resubmissions due no later than 11:59 PM PDT June 29.
Beyond the recalculations, Clover establishes that CMS cannot use measures outside its statutory authority and must follow notice and comment to impose additional measures. For plans currently in litigation or considering a challenge, Clover affirms that CMS’s Star Ratings methodology is not beyond scrutiny and that challenges grounded in statutory authority and procedural compliance can succeed. This is particularly true after both Azar v. Allina Health Svcs., 587 U.S. 566 (2019) and Loper Bright Enters. v. Raimondo, 603 U.S. 369 (2024) altered the administrative law landscape for CMS. Plans that have seen their ratings affected by measures adopted outside of § 1395w-22(e) or without proper rulemaking now have a legal roadmap to follow.
[1] The ten measures invalidated under this basis are: Medication Adherence, Diabetes (D08); Medication Adherence, Hypertension (D09); Medication Adherence, Cholesterol (D10); Phone Call Center (C33); Phone Call Center (D01); Appeals Decisions (C32); Rating of Drug Plan (D05); Getting Needed Drugs (D06); Medication Therapy Management Completion (D11); and Pharmacy Statin Use (D12).
[2] The court additionally held that CMS is obligated to consider the data collected under §1395w-22(e).
[3] The remaining ten measures invalided by this part include: Improving Mental Health (C05); Reducing Falling (C15); Getting Needed Care (C22); Rating of Health Care Quality (C25); Care Coordination (C27); Improving Bladder Control (C16); Annual Flu Vaccine (C03); Improving Physical Health (C04); Getting Care Quickly (C23); and Customer Service (C24).
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