CVS Takes Medicare Advantage Star Ratings Fight to Federal Court
CVS Health has moved to block a projected $2 billion revenue hit tied to its 2027 Medicare Advantage star ratings, filing suit in Georgia federal court over the methodology the Centers for Medicare & Medicaid Services used to calculate next year’s scores. The complaint asks the court to vacate the star ratings assigned to dozens of CVS contracts and to force CMS to recalculate them without the disputed measures.
The dispute reaches beyond one insurer’s balance sheet. Medicare Advantage star ratings determine bonus payments, marketing leverage, and plan competitiveness in a market where even small shifts in quality scores can alter enrollment and federal revenue. For CVS, the stakes are unusually large because Aetna serves 4.2 million Medicare Advantage beneficiaries and the company says 43 contracts would have earned ratings at least 0.5 points higher if the contested measures were removed.
One line in the complaint captures the posture of the case: CVS says it is not asking the court to invent a new legal theory, but to apply the same reasoning already used in the earlier Clover Health litigation. That prior ruling found that CMS had used 20 measures illegally when calculating 2026 scores, and the agency’s decision to retain half of those contested measures for most insurers in 2027 has opened the door to a wave of litigation.
Why the 28 disputed measures matter to Aetna’s margins
CVS is challenging 28 measures, more than any other insurer so far. Alignment Healthcare, SCAN Health Plan, Healthfirst, and Centene have each filed their own lawsuits, but the breadth of CVS’ challenge stands apart both in scale and in the amount of money the company says is at risk. While other insurers have described losses in the hundreds of millions, CVS says the lower ratings will translate into more than $2 billion in lost payments in 2028, when reimbursement is adjusted to reflect 2027 performance.
The math is straightforward, and for Aetna it is severe. The lost revenue is small relative to CVS’ annual premiums, which reached almost $135 billion in 2025, yet the figure would erase Aetna’s operating income of $1.8 billion from last year. For a division already trying to recover from elevated Medicare seniors’ medical costs, that kind of hit would directly threaten margin repair.
CVS’ own recent strategy makes the timing more consequential. The company cut benefits and exited unprofitable markets heading into 2026, actions that helped drive stronger second-quarter profitability this year. Aetna leadership has made the restoration of Medicare Advantage margins a central objective, and that goal now sits in direct tension with the star ratings downgrade.
The legal complaint argues that CMS relied on measures the agency lacked authority to adopt or use without proper notice-and-comment rulemaking, in violation of the Administrative Procedure Act. In practical terms, CVS is attacking the procedural foundation of the ratings themselves, not merely the result. If the court accepts that argument, the agency would have to rebuild the ratings without the disputed measures, a shift that could alter both the quality score and the downstream payment formula.
Aetna’s membership base makes the rating drop especially visible. The percentage of members in plans rated four stars or above fell from 84% in 2026 to 67% in 2027, a decline that immediately narrows the company’s bonus-eligible footprint. In Medicare Advantage, that kind of contraction is not just a reputational setback; it can affect plan design, consumer selection, and the ability to compete on supplemental benefits.
CMS faces pressure from courts, insurers, and critics of the bonus system
The lawsuit lands at a moment when the Medicare Advantage star program is already under scrutiny from multiple directions. Insurers argue the system is overly complex and changeable, and several have now decided that litigation offers the fastest route to relief. CVS joins a growing cluster of plans using the same core logic: CMS adopted measures that should not have been used to determine next year’s ratings.
The broader policy fight is equally important. Budget hawks and health policy researchers have long criticized the star bonus program for failing to reliably improve plan quality while adding to federal spending on Medicare Advantage. KFF estimates that CMS paid at least $12.7 billion in bonuses last year, a figure that keeps the debate focused on whether the system rewards true quality improvement or simply transfers more public money to plans that can navigate the scoring rules most effectively.
For CVS, the immediate problem is not abstract policy design. It is the way regulatory scoring interacts with clinical quality metrics, coding, enrollment, and payment. Medicare Advantage plans depend on the star system for a mix of financial and competitive advantages, so when a rating slips, the effect can cascade through reimbursement, bid strategy, and market positioning. A measure that CMS treats as valid can change the economics of a plan even when the underlying service footprint is unchanged.
The legal conflict also signals how unstable the current framework has become. Once one court concluded that CMS had relied on illegally adopted measures, other insurers had a clear roadmap for challenge. CVS is now using that opening at a much larger scale, and its filing suggests the company sees the 2027 ratings as both procedurally flawed and financially damaging enough to warrant urgent intervention.
The case will test how far CMS can go in preserving its scoring approach after the Clover ruling and how much flexibility the agency retains when rating Medicare Advantage plans for payment purposes. If the court agrees with CVS, dozens of contracts could be recalculated. If it does not, Aetna’s margin recovery plan will have to absorb a major payment shock while the insurer continues to manage rising care costs in its Medicare business.