Judge Rules in Favor of UnitedHealth Group, Directs CMS to Revise Medicare Star Ratings

A federal judge in Texas has recently mandated the Centers for Medicare and Medicaid Services (CMS) to reevaluate UnitedHealth Group Incorporated’s UNH Medicare Star Ratings for the 2025 plan year. Jeremy Kernodle of the U.S. District Court for the Eastern District of Texas decided in favor of UnitedHealthcare in a lawsuit against the CMS.

The court determined that CMS violated the Administrative Procedure Act of 1946 by incorrectly categorizing a test call to UnitedHealthcare’s call center as unsuccessful. This misclassification adversely affected the company’s Medicare Advantage star ratings for 2025. The judge instructed the agency to recalculate the ratings without using the disputed test call data and to publish the revised results immediately on the Medicare Plan Finder.

Despite ruling in favor of UnitedHealthcare, the judge did not find merit in the company’s claim that CMS applied a different standard compared to Elevance Health, Inc. (ELV) when assessing call center performance. Nevertheless, this ruling has significant implications for other Medicare Advantage insurers currently engaged in lawsuits regarding their star ratings.

Impact on Insurers’ Ratings and Revenue

For insurers, a single unsuccessful call can hinder a plan from achieving a five-star rating, which could cost them millions of dollars. The UnitedHealthcare case could set a critical precedent for evaluating star ratings, especially concerning how private contractors assess call center performance. The CMS has already begun efforts to lessen the influence of call center metrics in determining final Medicare Advantage star ratings.

Star ratings play a crucial role in an insurer’s ability to attract new members and secure funding. Following the recalculation, UnitedHealthcare is likely to see a substantial increase in quality bonus payments for 2026. Currently, UnitedHealth holds a Zacks Rank #3 (Hold).

UNH’s victory represents the third defeat for CMS in recent star ratings lawsuits, raising the prospects for Humana Inc. (HUM) and Centene Corporation (CNC), as they challenge their own ratings.

Humana, which heavily relies on Medicare Advantage, experienced a decline in its 2025 star ratings primarily due to unexpectedly high cutoff points for specific measures, which were notably above historical averages.

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Key Stock Analysis Reports:

• UnitedHealth Group Incorporated (UNH): Free Stock Analysis Report
• Humana Inc. (HUM): Free Stock Analysis Report
• Centene Corporation (CNC): Free Stock Analysis Report
• Elevance Health, Inc. (ELV): Free Stock Analysis Report

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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.