Alignment Takes CMS to Court Over a Sharp Star-Rating Collapse
Alignment Healthcare moved fast after CMS released the 2027 Medicare Advantage star ratings. One day after the scores became public, the California insurer filed suit in federal court in Washington, D.C., seeking to overturn a steep decline that threatens a large share of its federal payments.
The legal complaint targets the scoring machinery itself. Alignment argues that CMS relied on a ratings methodology that never went through notice-and-comment rulemaking, making the process unlawful under the Administrative Procedure Act. In practical terms, the company is not only challenging a bad grade; it is attacking the rules used to assign the grade.
The stakes are direct and immediate. Alignment covers roughly 240,000 members across five states, and the drop in plans rated at least 4 stars — from 98% in 2026 to 25% in 2027 — is expected to cost the insurer more than $200 million in payments in 2028, the year affected by the new ratings.
A Payment Program Built on Quality Scores
The Medicare Advantage star system does more than rank plans for marketing purposes. The ratings determine bonus payments and competitive positioning inside a privatized Medicare market where higher scores can mean more revenue, stronger enrollment prospects, and greater negotiating leverage. A one- or two-point swing can reshape a plan’s business model for the following year.
That financial pressure explains why these cases keep reaching court. CMS has recalculated ratings for at least one insurer in each of the past three years after plans won legal challenges arguing that the agency exceeded its authority or failed to follow required procedures. The repeated revisions have turned the star program into a recurring source of litigation rather than a settled quality metric.
Alignment’s complaint leans on the same legal theory that has already gained traction elsewhere: CMS cannot quietly change core scoring rules through technical notes and internal adjustments when Congress required regulatory action. The company says the same contested measures remain embedded in the 2027 calculations, even though their legality is already being challenged in a separate case involving 2026 ratings.
The argument is simple. If the measurement tool is unlawful, the result built from it cannot stand.
The Same Measures, the Same Legal Fight
CMS denied Alignment’s request to recalculate its 2027 ratings without the disputed measures on Oct. 7, one day before the agency released the scores on Oct. 8. Alignment had asked CMS on Oct. 6 to determine the stars without those measures, setting up the confrontation before the public release.
The complaint says the agency’s approach violates the Administrative Procedure Act because the methodology was not adopted “by regulation.” In the company’s telling, CMS has continued to rely on ten measures that should not have been used in the first place. The lawsuit also points to a broader procedural objection: regulators cannot move critical scoring standards through informal technical guidance and then treat the result as binding for payment purposes.
That legal claim sits at the center of a broader struggle over administrative control. If CMS can revise the formulas behind quality bonuses without rulemaking, insurers say, then the agency can effectively move the goalposts after plans have already made operational and clinical investments to chase a higher score.
A sudden drop in star ratings can reshape enrollment and revenue far faster than any clinical redesign can respond.
Court Decisions Have Already Shaken the Program
Recent rulings have made the stars system look fragile. A Georgia court this spring found fault with 20 CMS star measures, ruling that 10 exceeded the agency’s statutory authority and 10 were procedurally invalid because they were not implemented through regulation. That decision did not just create a narrow compliance issue. It raised the possibility that the architecture of the program itself rests on legally unstable ground.
CMS responded in June by recalculating 2026 ratings without the first 10 measures, but it did not withdraw the second 10 for any insurer except Clover Health, which had brought the suit. That selective response opened the door to more challenges. Alignment and two other health plans then filed lawsuits seeking better scores, and those cases are still pending.
The current suit is best understood as a continuation of that campaign rather than an isolated protest. Alignment is using the same legal logic to attack a new ratings cycle, and the company is doing so before the 2028 selling season, when the 2027 scores will shape how plans market themselves to beneficiaries.
CMS Faces Pressure From Both Sides
The star program has drawn criticism from two very different directions. Insurers argue that CMS can alter the scoring formula without adequate rulemaking and thereby damage plan finances. Budget hawks and health policy researchers, by contrast, argue that the program does not reliably improve plan quality and may instead contribute to overpayments inside Medicare Advantage.
That tension sits at the core of the debate. A rating system meant to reward higher-quality care has become a battleground over payment design, administrative authority, and federal spending. When scores determine revenue, the methodology itself becomes a financial asset.
CMS did not respond to a request for comment. The agency’s silence leaves the litigation to do the talking for now, and the complaint makes clear that Alignment intends to press for a recalculation before the next enrollment cycle begins.
What the Dispute Means for Medicare Advantage Plans
For insurers, the case is about far more than one bad year. A successful challenge could force CMS to revisit how it builds and updates the star program, potentially affecting reimbursement across the sector. For patients, the consequences are less direct but still real: the ratings influence which plans can grow, how aggressively they market, and how much capital they have to invest in benefits and care management.
The dispute also exposes how dependent the Medicare Advantage market has become on a measurement system with unstable legal footing. Once the scoring process is contested, every payment cycle becomes a test case. Plans with a severe drop in ratings have strong incentives to litigate, especially when hundreds of millions of dollars are on the line.
Alignment’s lawsuit now joins a growing docket of cases challenging the way CMS scores Medicare Advantage plans. The immediate question is whether the court will treat the disputed measures as an unlawful foundation for the 2027 ratings or allow the scores to stand while the broader fight over the star system continues.