Major Medicare Advantage Insurer Lawsuit Against Trump Administration Over 2027 Ratings

A prominent Medicare Advantage insurer has initiated legal action against the Trump administration. The dispute revolves around the 2027 star ratings, which the insurer claims were calculated unlawfully by federal regulators. These calculations could lead to significant financial losses for the company. Alignment Healthcare has filed a lawsuit against the Centers for Medicare & Medicaid Services (CMS) in a Washington, D.C., federal court, challenging the 2027 Medicare Advantage quality ratings. The company contends that CMS relied on measures not properly established through the federal rulemaking process.

‘Once again, CMS has used the same ten measures in calculating Alignment’s 2027 Star Ratings without first promulgating them ‘by regulation,’ as Congress expressly required,’ stated Alignment in its complaint.

This legal battle echoes a prior challenge against the 2026 Star Ratings. The insurer’s primary concern is the financial impact, with the company estimating losses exceeding $200 million in payments by 2028 due to lower ratings.

Medicare Advantage star ratings, which range from one to five stars, are critical for both insurers and beneficiaries. They assist consumers in comparing the quality of Medicare Advantage plans and determine whether insurers qualify for quality bonus payments. A minor decrease of half a star, which Alignment experienced, can lead to substantial financial implications.

CMS unveiled its 2027 Medicare Advantage star ratings on October 8. In these ratings, Alignment’s California HMO contract fell from four stars to 3.5 stars. The decrease also reflected a sharp drop in the share of Alignment members enrolled in plans receiving at least four stars. According to Healthcare Dive, enrollment in these higher-rated plans plummeted from 98 percent in 2026 to 25 percent in 2027.

Alex Beene, a financial literacy instructor at the University of Tennessee at Martin, remarked to Newsweek, ‘The significant decline raises questions about whether the government’s evaluation process is consistent, transparent, and accurately reflects the quality of care beneficiaries receive.’

Alignment operates Medicare Advantage plans across five states. The insurer seeks court intervention to set aside the 2027 ratings and demands a recalculation that excludes disputed measures. A central argument in the lawsuit is CMS’s reliance on ‘technical notes’ instead of formal notice-and-comment rulemaking, violating the Administrative Procedure Act.

‘The relief sought is consistent with the relief Alignment is seeking in its Stars litigation case filed in July 2026,’ a company spokesperson informed Newsweek.

The insurer claims CMS’s methodologies are inconsistent with legal requirements and fail to compensate Alignment adequately for the quality of care provided.

A previous federal court in Georgia challenged twenty measures CMS used in the star ratings. Ten measures were deemed outside CMS’s statutory authority, while another ten were found procedurally invalid. Despite recalculating the 2026 ratings after litigation, CMS allegedly continued to use disputed measures for 2027.

Michael Ryan, a finance expert, told Newsweek, ‘Its argument is that CMS used rating measures without following the legally required rulemaking process. That’s a serious question.’

The Trump administration has appealed a prior court decision involving Clover Health, leaving broader legal questions unresolved. According to Alignment, CMS’s actions have diverged from Congress’s original intent in creating the rating system.

‘Congress created the Star Ratings program to allow Medicare Advantage beneficiaries to make informed decisions,’ argued Alignment.

This lawsuit addresses the grading of Alignment’s plans and the potential impact on payments within the Medicare Advantage system. Star ratings guide consumers in comparing plans and influence insurers’ eligibility for quality-related federal payments.

Beene emphasized, ‘Ultimately, the greatest concern is for seniors relying on these plans.’

Alignment aims to have its 2027 star ratings recalculated entirely. Financial consequences extend into 2028 when affected payments would be implemented. A courtroom victory could restore bonus payments to insurers without demonstrating improved patient care. Ryan noted, ‘It’s crucial to separate financial and healthcare quality disputes.’

For more information, contact Newsweek editors Jason Lemon and Sam Wilson.