A major Medicare Advantage insurer is suing the Trump administration over its 2027 star ratings, arguing that federal regulators unlawfully calculated scores that could cost the company hundreds of millions of dollars. Alignment Healthcare filed a lawsuit against the Centers for Medicare & Medicaid Services in federal court in Washington, D.C., challenging its latest Medicare Advantage quality ratings. The company alleges that CMS relied on measures that were 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," Alignment said in its complaint. "Indeed, the legality of CMS's use of these same measures is already before this Court in Alignment's pending challenge to its 2026 Star Ratings. CMS's continued reliance on those measures for 2027 presents the same legal question." The dispute could have significant financial consequences for the insurer.
Alignment says the lower ratings could cost it more than $200 million in payments in 2028. Newsweek reached out to Alignment and CMS via email for comment. Medicare Advantage star ratings run from one to five stars and matter to both insurers and beneficiaries.
The ratings are designed to help consumers compare the quality of Medicare Advantage plans, while also determining whether insurers qualify for potentially lucrative quality bonus payments. That means even a half-star change, which Alignment experienced, can carry major financial consequences. Alignment's lawsuit says that "the financial consequences from just a single half-star change in a plan's overall Star Rating can easily amount to hundreds of millions of dollars for an individual plan." CMS released its 2027 Medicare Advantage star ratings on October 8.
In them, Alignment's California HMO contract dropped from four stars to 3.5 stars, according to reporting on the company's complaint. More broadly, the share of Alignment members enrolled in plans receiving at least four stars dropped sharply. Healthcare Dive reported that it fell from 98 percent in 2026 to 25 percent in 2027.
Currently, Alignment operates Medicare Advantage plans across five states. The insurer is now asking the court to set aside its 2027 ratings and require CMS to recalculate them using a methodology that excludes the disputed measures. At the heart of the lawsuit is Alignment's contention that CMS established important elements of its methodology through "technical notes" rather than the formal notice-and-comment rulemaking process.
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