CMS Recalculation of Medicare Advantage Ratings Signals Broader Implications from Clover Health Victory

A recent federal court decision in favor of Clover Health has quickly evolved from an insurer-specific dispute into one of the most significant Medicare Advantage (“MA”) regulatory developments in recent years. On May 27, 2026, the U.S. District Court for the Southern District of Georgia held that CMS improperly calculated Clover’s 2026 Star Rating and ordered the agency to set aside and recalculate the rating. The court held that CMS improperly included twenty measures in Clover's 2026 Star Rating calculation, finding that ten measures relied upon data sources that Congress had not authorized and ten others were implemented without the statutorily mandated notice-and-comment process. Following the ruling, CMS recalculated Clover’s primary PPO contract from 3.5 Stars to 4.5 Stars.

What makes the decision particularly significant is that the court’s reasoning goes far beyond a routine challenge to CMS methodology. Applying the framework from the U.S. Supreme Court’s decision in Loper Bright Enterprises v. Raimondo, 603 U.S. 369, 412 (2024), Judge Lisa Godbey Wood held that CMS may calculate MA Star Ratings only using measures based on data collected under the Medicare Advantage quality-improvement program authorized by Congress. The court specifically rejected CMS’s position that it possessed broader discretion to incorporate additional quality measures not derived from those statutory data sources. As a result, the court invalidated numerous measures tied to prescription drug event data, call-center monitoring data, appeals metrics, and several Part D-related measures. While the ruling formally applies only to Clover, the opinion provides a detailed statutory roadmap that other MA organizations may use to challenge their own Star Ratings.

The opinion also presents a significant procedural challenge to CMS’s longstanding use of subregulatory guidance. The court concluded that multiple Star Ratings measures were adopted through annual Technical Notes and related guidance without the notice-and-comment rulemaking required under the Medicare Act. In reaching that conclusion, the court relied heavily on the Medicare Act’s rulemaking requirements and the reasoning endorsed in Allina Health Servs. v. Price, 863 F.3d 937, 943 (D.C. Cir. 2017) (citing 42 U.S.C. § 1395hh(a)(2)), aff’d sub nom. Azar v. Allina Health Servs., 587 U.S. 566 (2019). The court explained that 42 U.S.C. § 1395hh(a)(2) requires notice-and-comment rulemaking whenever CMS establishes or changes a “substantive legal standard” governing Medicare payments or benefits. Applying the framework articulated in Allina, the court found that Star Ratings measuring specifications are not merely technical guidance because they directly affect benchmark increases, rebate percentages, and Quality Bonus Payments available to Medicare Advantage organizations. As the court observed, measure specifications function as a “deciding principle” in determining payment outcomes and therefore govern payment for services within the meaning of the statute. Because Star Ratings directly affect reimbursement, benchmarks, rebates, and bonus payments, the court found that the ratings are a substantive legal standard. Accordingly, changes to the measure specifications underlying those ratings cannot be implemented solely through informal guidance. This aspect of the ruling is particularly noteworthy because CMS has historically relied heavily on subregulatory tools to refine and update the Star Ratings program.

Perhaps the most important recent development is CMS’s response. On June 17, 2026, CMS notified MA organizations that it would voluntarily recalculate certain 2027 Quality Bonus Payment (“QBP”) ratings in light of the Clover decision. CMS also announced that contracts receiving improved QBP ratings will have a time-limited opportunity to revise and resubmit bids for the upcoming plan year. In conducting the recalculations, CMS removed all Part D measures and several disputed Part C measures that were implicated by the Clover litigation. Although CMS emphasized that the recalculation should not be viewed as a permanent policy change, the agency’s actions demonstrate that the effects of the decision extend beyond Clover itself and are already influencing payment determinations across portions of the MA marketplace.

For Medicare Advantage organizations, the financial implications could be substantial. The court repeatedly emphasized that Star Ratings are not merely informational tools for beneficiaries; they directly determine payment outcomes. Plans achieving four Stars or higher qualify for enhanced benchmarks, increased rebate percentages, and valuable Quality Bonus Payments. Clover alleged that the difference between its original 3.5-Star rating and a 4-Star-or-higher rating cost the company approximately $120 million in bonus and related payments. The court’s analysis is significant because it characterized Star Rating measure specifications as a “deciding principle” in reimbursement calculations, making it more difficult for CMS to argue in future litigation that ratings or underlying measure specifications have only indirect economic effects.

The practical impact may reach far beyond Clover. Industry observers have noted that approximately 175 MA prescription-drug-plan contracts received 3.5-Star ratings for 2026 and narrowly missed higher bonus thresholds. Even modest methodological adjustments therefore have the potential to affect billions of dollars in aggregate reimbursement, bid strategies, benefit design, and competitive positioning.

The decision also reflects a broader shift in administrative-law jurisprudence following Loper Bright. Rather than deferring to CMS’s interpretation of the Medicare statute, the court independently analyzed the statutory text and repeatedly emphasized that federal agencies possess only those powers expressly granted by Congress. For payors, providers, and healthcare organizations operating within heavily regulated federal programs, the ruling may signal a more favorable environment for challenges to agency actions that rely on expansive interpretations of statutory authority or subregulatory guidance. As courts continue applying heightened scrutiny to administrative action, stakeholders may increasingly reassess longstanding CMS policies that previously appeared insulated from judicial review.

Looking ahead, CMS must decide whether to continue defending the existing framework through appellate review, pursue broader rulemaking efforts, or seek legislative clarification regarding the scope of its authority. Although CMS may seek review in the Eleventh Circuit, the agency’s prospects are far from certain. Judge Wood’s opinion rests largely on questions of statutory interpretation and administrative law rather than factual disputes, making the appeal likely to focus on whether CMS possesses authority to include non-§ 1395w-22(e) measures in the Star Ratings program and whether the Medicare Act required notice-and-comment rulemaking for the challenged measures. Importantly, the opinion is deeply grounded in the Supreme Court’s Loper Bright analysis, with the court declining to afford meaningful deference to CMS’s interpretation of the Medicare statute and instead conducting its own textual analysis of the governing provisions. Because the decision relies heavily on statutory text, congressional structure, and limits on agency authority, CMS cannot simply argue that its interpretation deserves deference—a strategy that may have been more successful prior to Loper Bright.  Ultimately, CMS may prefer to leave alone a well-reasoned trial court decision in one federal district that it may argue is only persuasive authority and confined to the parties of the case, rather than seeking review and creating unfavorable circuit court precedent.

Meanwhile, MA organizations should closely evaluate whether disputed measures affected their own ratings, reimbursement, and market position. The most important lesson from the Clover decision may be that Star Ratings disputes are no longer simply technical disagreements over quality metrics. They have become vehicles for challenging the legal foundations of CMS authority itself. What began as a single insurer’s challenge to a 3.5-Star rating has now become a significant test of how Medicare Advantage quality programs will be developed, administered, and defended going forward.