Humana Loses Second Lawsuit Challenging Medicare Advantage Star Ratings
In a setback for the nation’s second-largest Medicare Advantage (MA) insurer, a federal judge on October 14, 2025, dismissed Humana’s second lawsuit against the Centers for Medicare & Medicaid Services (CMS), upholding the agency’s controversial 2025 star ratings that could cost the company billions in bonuses and enrollment revenue. The ruling, issued by U.S. District Judge Reed O’Connor in the Northern District of Texas, comes just days before Medicare open enrollment begins on October 15, locking in Humana’s 3.5-out-of-5 overall rating and dashing hopes for a recalculation. This marks Humana’s second courtroom defeat on the issue this year, bucking a trend where peers like UnitedHealth Group have successfully challenged similar CMS decisions.
Background on the Star Ratings Dispute
Star ratings, scored from 1 to 5, evaluate MA plans on metrics like customer service, preventive care, and appeals processing, directly influencing quality bonus payments—up to 5% above benchmark rates for high performers—and consumer appeal during enrollment. Humana, which derives over 80% of its revenue from MA, saw its average rating slip to 3.5 for 2025, down from 4.25 in 2024, primarily due to penalties in the “staying healthy” category. The flashpoint: CMS’s assessment of three secret shopper test calls to Humana’s foreign language call centers in late 2023. Evaluators alleged no callbacks were offered or received, docking up to 1.25 stars per contract—a move Humana called “unprecedented and punitive.”
Humana first sued in June 2025, arguing CMS’s methodology was arbitrary and violated the Administrative Procedure Act. That case was dismissed in mid-July for failing to exhaust administrative remedies. Undeterred, Humana refiled weeks later, seeking an injunction to pause the ratings pending review. The insurer claimed the tests ignored its multilingual support for over 1 million non-English speakers and deviated from CMS guidelines allowing callbacks within 72 hours.
Details of the Second Lawsuit and Ruling
Filed in the U.S. District Court for the Northern District of Texas, the suit targeted CMS’s “no-callbacks policy” as inconsistent with federal law and prior agency practices. Humana sought declaratory relief, alleging the ratings were “arbitrary and capricious” and would cause “irreparable harm” through lost bonuses estimated at $1.2-$3 billion for 2025 alone, plus enrollment drops of up to 500,000 members.
Judge O’Connor rejected these claims outright, ruling the dismissal with prejudice—meaning it can’t be refiled in this court. He found CMS’s evaluations “in accordance with its guidelines” and not arbitrary, emphasizing the agency’s discretion in quality audits. “The agency’s determination is in accordance with its guidelines and is not arbitrary or capricious,” O’Connor wrote. This contrasts with wins by UnitedHealth (recalculating 2024 scores after a similar suit) and Alignment Healthcare, highlighting inconsistent judicial outcomes in MA rating battles.
Financial and Strategic Implications
The decision amplifies Humana’s woes amid a broader MA slowdown: Enrollment growth has stalled at 1-2% annually, pressured by CMS’s 2025 payment cuts of 0.16% and scrutiny over prior overpayments. Analysts at Capstone pegged the lost upside at $3 billion, potentially slashing Humana’s 2025 earnings by 10-15% and contributing to a 3.5% stock dip post-ruling. Longer-term, lower stars could erode market share—Humana serves 6 million MA members—as consumers favor 4+ rated plans eligible for $0 premiums.
For the industry, the ruling reinforces CMS’s authority amid a wave of challenges: Over 20 suits since 2023, with mixed results signaling potential appeals court tests. It also spotlights equity issues in multilingual services, as Humana argued the tests disadvantaged diverse enrollees—a concern echoed in ongoing CMS equity audits.
Reactions and Next Steps
Humana expressed dismay but resolve: “We are disappointed with the Court’s ruling but remain committed to delivering meaningful improvements to our Star measurements and returning to top quartile performance as quickly as possible,” a spokesperson said. “Millions of Americans choose Medicare Advantage because of its high-quality, affordable care. They deserve to have the quality of that care evaluated with consistency and integrity.” The company is “considering all available legal options,” including a possible appeal to the Fifth Circuit, though experts deem it a long shot given the judge’s comprehensive rejection.
CMS has not commented publicly, but the agency continues refining ratings for 2026, incorporating AI-driven audits and health equity weights. As open enrollment kicks off, Humana plans aggressive marketing to mitigate damage, while rivals capitalize on their stronger scores.
This case underscores the high-stakes tension between innovation in MA delivery and regulatory oversight. For deeper dives into MA trends or Humana’s recovery playbook, let me know!