Federal Officials Recalculate Medicare Advantage Star Ratings Amid Industry-Led Lawsuits

Federal officials recalculated the quality ratings for 2026 Medicare Advantage plans following legal challenges from the health insurance industry, according to a government memo reported by STAT on June 18, 2026. The decision impacts the distribution of taxpayer-funded bonus payments awarded to plans that achieve high star ratings.

The Centers for Medicare and Medicaid Services (CMS) took the action after insurance companies filed lawsuits challenging lower ratings. These ratings determine whether a plan receives financial incentives from the government. While many insurers lose these cases, some have successfully forced the government to adjust its calculations.

Why did CMS recalculate the 2026 Medicare Advantage star ratings?

CMS recalculated the ratings because of ongoing legal pressure from the health insurance industry. According to the STAT report, insurers have inundated the agency with lawsuits when they receive lower star ratings that threaten their eligibility for government bonuses.

This isn’t the first time the agency has blinked. In 2024, CMS redid Medicare Advantage star ratings after federal judges ruled that the government had erred in its original calculations. The June 18, 2026, memo indicates a recurring pattern of volatility in how these quality metrics are finalized.

How do star ratings affect insurance company payments?

Medicare Advantage plans that earn a quality rating of at least four out of five stars qualify for bonus payments. These payments serve as a financial incentive for insurers to maintain high standards of care and member satisfaction.

The scale of these bonuses has grown significantly. According to data cited by STAT, bonus payments reached $16 billion this year. That figure represents a doubling of the bonus pool since 2020. For context, this amount is nearly equal to the entire annual budget of the Centers for Disease Control and Prevention.

What is the impact of these legal disputes on the Medicare program?

The frequent recalculations add instability to the Medicare Advantage program. When ratings shift due to court orders or government memos, the financial landscape for insurers changes abruptly, which can affect how plans are priced and marketed to seniors.

The conflict highlights a tension between government oversight and industry profit. CMS uses the star ratings to hold insurers accountable for quality, but the high stakes of the bonus payments make any rating drop a potential legal trigger for the companies involved.

• Financial Stakes: The $16 billion bonus pool creates a high-incentive environment for insurers to contest any rating below four stars.
• Legal Precedent: The 2024 court ruling established that CMS calculations can be legally challenged and overturned.
• Budgetary Contrast: The bonus payments now rival the funding of major public health agencies like the CDC.

The government memo reported on June 18, 2026, confirms that the agency continues to adjust its methodology in response to these industry pressures. It remains unclear how many specific plans will see their ratings increase or decrease as a result of this latest recalculation.