CMS is appealing a federal court order that forced the agency to redo the 2026 Medicare Advantage rating for Clover Health’s largest contract, a move that could shift millions of dollars in quality bonuses.
Appeal sent to the 11th Circuit after judge’s ruling
The July 21 filing moves the dispute to the U.S. Court of Appeals for the 11th Circuit. In a one‑page brief, the defendants said they are challenging the May 29 judgment that granted Clover partial summary judgment and rejected the government’s request to dismiss the case.
The lawsuit began in November when Clover Insurance Company, a subsidiary of Clover Health Investments, complained that its flagship Medicare Advantage contract had been assigned a 3.5‑star score. The rating, the filing notes, fell short of the four‑star threshold needed for full quality bonus eligibility.
U.S. District Judge Lisa Godbey Wood’s May 27 order found that the agency had improperly counted 20 quality measures. Ten of those relied on data the Medicare statute does not authorize for rating calculations, such as medication adherence, call‑center performance, appeals decisions and pharmacy‑related metrics.
The remaining ten measures were deemed procedurally invalid because they had not been adopted through the required notice‑and‑comment rulemaking. Those metrics covered annual flu vaccination, physical and mental health, fall risk, bladder control, access to care, customer service, overall healthcare quality and care coordination.
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Rating adjustment and its financial implications
After the judge set aside the 3.5‑star assessment, the agency issued a June 9 regulatory filing that raised the score to 4.5 stars for the H5141 preferred provider organization contract, which covers more than 97 % of Clover’s members. The health maintenance organization contract was untouched and remains at a four‑star rating.
Star scores matter because Medicare Advantage plans with at least four stars qualify for quality bonus payments and larger rebates. Those financial incentives can be used to lower premiums or add benefits for enrollees.
Clover estimated in its complaint that the original 3.5‑star rating would have cost the company and its members roughly $120 million in 2027 quality bonuses and related payments. The 2026 ratings, released in fall 2025, determine the 2027 bonus amounts.
According to the agency, about 40 % of Medicare Advantage prescription‑drug contracts earned at least four stars, accounting for roughly 64 % of enrollment. That share shows how key the rating system is for plan economics.
For beneficiaries, a higher rating can translate into lower out‑of‑pocket costs or extra services. When a plan’s score improves, the extra money it receives often flows back to members in the form of reduced premiums or expanded coverage options.
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Ripple effects across the Medicare Advantage sector
The decision has sparked additional lawsuits. Elevance Health filed a suit in July alleging that the agency gave Clover more favorable treatment and denied five of its contracts the same 20‑measure recalculation. Elevance projects a loss of about $115 million in 2027 quality bonuses if the rating remains unchanged.
SCAN Health Plan and Alignment Health also lodged complaints, arguing that the agency’s broader recalculation did not fully apply both parts of the judge’s ruling. Each seeks to lift a contract from four stars to 4.5 stars.
In June, the agency announced it would voluntarily recalculate 2027 quality‑bonus ratings for certain contracts while protecting plans whose scores would otherwise fall. The move appears aimed at smoothing out the fallout from the Clover case.
While the appeals process unfolds, insurers are watching closely. A shift in how quality measures are counted could reshape competitive trends in the Medicare Advantage market for years to come.