Clover Health v. CMS: A Comprehensive Review of the Star Ratings Lawsuit

The Star Rating is a revenue switch, not just a score

CMS rates every Medicare Advantage (MA) plan each year on a one-to-five-star scale, and the rating does more than describe quality. Plans at four stars or higher earn quality bonus payments and a higher rebate percentage, sums that run to the billions across the industry. The rating is built from dozens of measures spanning clinical outcomes, patient experience, and plan operations, and crossing the four-star line is often the difference between a contract that pays its way and one that does not.

The program is also mid-rule-change. The 2027 Star Ratings retire the reward factor and replace it with the Health Equity Index, which redirects bonus headroom toward how well a contract serves its poorest and most disabled members. That is the backdrop against which the courts are now pulling at the program’s statutory seams.

Clover sued the authority, not the methodology

Plans have sued CMS over Stars before, but the earlier cases attacked how CMS applied its methodology. SCAN Health Plan and Elevance Health won in 2024, forcing CMS to recalculate industry-wide after the Tukey outlier deletion and cut-point implementation were challenged. Humana lost twice in the Northern District of Texas, where courts deferred to CMS’s methodology. Every one of those cases argued the math, not the right to use it.

Clover’s suit was built on a different theory: it attacked whether CMS had the legal authority to use certain measures at all, not just whether it applied them correctly. The move echoes the 2025 ruling that vacated CMS’s RADV audit rule on procedural grounds, where a federal judge found CMS had changed its legal reasoning without reopening the rule to comment. In both cases the process, not the policy, was what gave way.

What was at stake for Clover was concrete. CMS assigned the company, a tech-enabled MA insurer, a 3.5 Star Rating for 2026, half a star below the 4.0 it argued it had earned. That half-star gap translated to roughly $120 million in lost quality bonus and related payments. Clover filed suit in the Southern District of Georgia in November 2025, challenging 20 of the measures used in its 2026 rating.

The court struck on two independent grounds

Judge Lisa Godbey Wood issued partial summary judgment for Clover on May 27, 2026, invalidating 20 measures across two separate legal grounds, 10 each. Both rulings cracked the program’s foundation, but on different statutes.

The statute names three data sources, and CMS went past them

The first theory rests on 42 U.S.C. 1395w-23(o)(4)(A), which provides that Star Ratings must be “based on the data collected under section 1395w-22(e).” That section covers only three measurement systems: HEDIS for clinical quality, HOS for the health outcomes survey, and CAHPS for patient experience. Clover argued, and the court agreed, that “based on” is an exclusive limit, not a floor.

The interpretive shift mattered because the Supreme Court’s 2024 decision in Loper Bright eliminated Chevron deference to agency interpretations. The court declined to follow earlier D.C. district court precedent that had deferred to CMS under Chevron. It cited Bostock in reading the legislative history: when Congress codified the five-star system in 2010, it deliberately narrowed the Secretary’s once-broad authority to “utilize whatever measures he or she deems fit.”

The 10 measures struck on this ground drew on data the statute never named: prescription drug event (PDE) records, call-center monitoring, contractor-generated data, and Part D authority. The court left HEDIS, HOS, and CAHPS intact.

• D08, Medication Adherence for Diabetes Medication
• D09, Medication Adherence for Hypertension Medication
• D10, Medication Adherence for Cholesterol Medication
• C33, Phone Customer Service
• C32, Appeals Administration
• D05, Rating of Drug Plan
• D06, Getting Needed Prescription Drugs
• D11, Medication Therapy Management Completion Rate
• D12, Statin Use for Persons with Diabetes
• C01, Rating of Diabetes Care

The measures were also never put through notice-and-comment

The second theory rests on section 1395hh(a)(2) of the Medicare Act, which requires formal notice-and-comment rulemaking for any policy that establishes or changes a “substantive legal standard” tied to benefits, payment, or eligibility. The court held that Star Ratings measure specifications qualify on both counts: they are “statements of policy” that signal CMS’s adjudicatory approach, and they are “substantive legal standards” that effectively set the financial rights of MA plans. CMS had never promulgated these measures through proper rulemaking.

The 10 measures struck on this ground:

• C05, Improving or Maintaining Mental Health
• C15, Reducing the Risk of Falling
• C22, Getting Needed Care
• C25, Rating of Health Care Quality
• C27, Care Coordination
• C16, Improving Bladder Control
• C03, Flu Vaccinations for Adults
• C04, Improving or Maintaining Physical Health
• C23, Getting Care Quickly
• C24, Rating of Health Plan

Three limits matter for what comes next. The court did not hand Clover a 4-Star rating; it left the recalculation to CMS’s discretion. It declined to reach Clover’s remaining claims, including a private-nondelegation challenge to the Independent Review Entity contractor, as moot. And the remedy was explicitly confined to Clover’s 2026 rating, though the legal reasoning reaches every plan.

The recalculation gave Clover more than it asked for

The ruling moved fast. CMS filed a motion for reconsideration on May 28, arguing its reply brief had been wrongly excluded as untimely. On June 9 it recalculated Clover’s 2026 rating to 4.5 Stars, half a star above the 4.0 the company had set out to recover, and a day later the stock sat at its highest level in more than four years. The fix overshot the ask.

CMS then extended a version of the fix to the rest of the industry. In mid-June it announced a voluntary, hold-harmless recalculation for MA organizations, but it did not uniformly strip the same 20 measures for every plan. That partial application is what turned one win into a wider problem: the reasoning pointed at every plan, but the remedy reached only some.

One ruling opened four new lawsuits

Because CMS did not apply the full 20-measure exclusion across the board, the ruling opened the floodgates. Elevance Health filed suit in July 2026, calling CMS’s voluntary recalculation an insufficient “half-measure” and seeking the same treatment as Clover. SCAN Health Plan and Alignment Healthcare followed with their own suits, and multiple other plaintiffs paused their proceedings to weigh the ruling’s implications.

As one analyst framed it, “a crack in CMS’s Star Ratings system is turning into a courtroom pile-on.” CMS filed its appeal to the U.S. Court of Appeals for the Eleventh Circuit on July 22 and 23, 2026, and the stakes of that appeal set the program’s direction for years.

Nearly half the measure set is now legally exposed

The structural exposure is the larger story. About 20 of roughly 47 Star Ratings measures now face an existential legal challenge, and the post-Loper Bright landscape means CMS commands less judicial deference than it once did. Moving forward, CMS may have to run full notice-and-comment for every measure change, a slow process set against the sub-regulatory guidance it has historically used.

For MA plans, the consequence is unpredictability in the inputs that drive ratings, bonus payments, and bid calculations. Analysts at Capstone warned that the decision “foreshadows a volatile direction” for the program, and advisers are telling MA organizations to model whether excluding the 20 challenged measures would revise their own scores, and whether they have grounds to bring similar claims.

The legal commentators tracked the implications almost identically. Crowell & Moring judged the broader industry impact “likely unavoidable” and noted CMS “may need Congress’s support in adjusting applicable laws.” Groom Law Group observed that 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. Mintz put the core problem plainly: the statutory data-source limitation “cannot be resolved through rulemaking alone.”

That is the asymmetry the appeal inherits. If the Eleventh Circuit reverses, the SCAN, Elevance, and Alignment suits lose their legal foundation. If it affirms, nearly half the Stars measure set could be permanently invalidated and the copycat litigation will multiply. The data-source defect is one CMS cannot repair by re-proposing the measures; restoring its authority would take Congress amending the Medicare statute.

What MA plans should do while the appeal runs

The operational task does not wait on the appeal. Plans are best served now by assessing whether excluding the 20 challenged measures would revise their own scores, and by modeling 2027 and 2028 bid assumptions under the rating uncertainty the ruling created. The durable work is measure governance: knowing which of your quality measures sit on legally settled ground and which do not, before a recalculation or a copycat suit forces the question. A plan that cannot see its own measure-level performance today is competing inside a lawsuit it cannot read.

Sources

• Crowell & Moring LLP, “Clover Insurance v. HHS: S.D. of Georgia Holds 20 Star Ratings Measures Unlawful” (May 29, 2026): the two legal theories, the 20 measures, and the call for congressional action. crowell.com
• Groom Law Group, “Oh, My Stars! A Federal Court (Again) Upends CMS’s Medicare Advantage Ratings” (June 25, 2026; updated July 15, 2026): recalculation, hold-harmless policy, and departure from prior litigation. groom.com
• Mintz, “Clover Health Decision Raises Significant Questions for CMS Star Ratings Framework” (June 10, 2026): statutory data-source limitation and rulemaking burden. mintz.com
• RISE Health, “Court tells CMS to redo Clover’s Star Rating. Here’s why it should be on your radar.” (June 2026): how the suit differs from prior Stars litigation. risehealth.org
• AMCP, “Summary and Analysis: Clover Insurance Co. v. HHS” (June 4, 2026): notice-and-comment holding and exposure of sub-regulatory guidance. amcp.org
• SEC Filing (Clover Health 8-K), June 9, 2026: confirms CMS recalculation to 4.5 Stars. sec.gov
• Modern Healthcare, “Clover Health wins Medicare Advantage star ratings lawsuit” (2026): summary judgment and recalculation timeline. modernhealthcare.com
• Healthcare Dive, “Insurers sue CMS over Medicare Advantage stars” (July 13, 2026): Elevance, SCAN, and Alignment copycat suits. healthcaredive.com
• Fierce Healthcare, “CMS appeals court decision behind 2026 MA stars recalculations” (July 2026): Eleventh Circuit appeal. fiercehealthcare.com
• WCHSB Insights, “A Crack in CMS’s Star Ratings System Is Turning Into a Courtroom Pile-On” (July 15, 2026): the copycat-litigation framing. insights.wchsb.com