Medicare Advantage star ratings function as the financial engine of the entire program. They determine which insurers collect billions in federal bonus payments, which plans can afford to offer $0 premiums and extras like dental cleanings and gym memberships, and which ones quietly exit your county when the math stops working in their favor. A federal court ruling involving Clover Health — a Medicare Advantage insurer operating primarily in New Jersey and a small number of other states — has placed that engine under direct legal scrutiny. The case challenges the statistical methodology CMS uses to assign those ratings, and the outcome could reshape what plans are available to you, what you pay, and what benefits you can count on during the next Annual Enrollment Period, which opens October 15 and closes December 7 each year.
To understand what is actually at stake, it helps to know how the star rating system is built. CMS evaluates Medicare Advantage plans on roughly 40 performance measures, grouped into categories that include management of chronic conditions like diabetes and high blood pressure, member access to timely appointments, and enrollee satisfaction surveys. Each plan receives a score on each measure, and those scores are then sorted into star categories using statistical cut points — the numerical thresholds that separate a two-star score from a three-star score, or a three-and-a-half-star score from a four-star score. Plans that reach four stars or higher receive what CMS calls quality bonus payments. In 2024, CMS paid out approximately $11.8 billion in those bonuses, according to CMS data. That money flows almost entirely to plans at or above the four-star line, and it is what allows high-rated plans to subsidize richer benefits for their members.
Clover Health's legal argument focused on a specific and technical piece of that methodology: the way CMS sets and applies those cut points. Clover argued that CMS applied its guardrail adjustments and cut point calculations in a manner that was inconsistent with the agency's own stated rules and insufficiently explained under the Administrative Procedure Act, the federal law that governs how agencies make and justify policy decisions. A federal court agreed with the core of that argument, finding that CMS had not adequately justified its approach. The ruling does not instantly rewrite every plan's star rating. But it creates a legal pathway for other insurers to challenge their own scores using similar arguments, and it puts CMS in the position of either defending its methodology in further litigation or revising it through formal rulemaking.
The financial consequences of landing on the wrong side of a cut point are not trivial. A plan that scores just below the four-star threshold receives zero bonus payment. A plan that scores just above it may collect hundreds of millions of dollars in additional federal revenue, depending on its enrollment size. For large national insurers like UnitedHealthcare and Humana, which together enroll tens of millions of Medicare Advantage members, a single star rating category shift can mean the difference between a profitable market and one they choose to exit. Both of those insurers have already pulled back from lower-margin counties in recent years, citing financial pressure from the star rating system. A court-ordered recalculation that moves additional plans below the four-star line could accelerate that trend in markets where plan competition is already thin.
For beneficiaries currently enrolled in a Medicare Advantage plan, the most immediate practical concern is plan stability. When an insurer loses bonus payment eligibility, it typically responds in one of three ways: it raises premiums, it cuts supplemental benefits like over-the-counter allowances or vision coverage, or it exits certain counties entirely. In 2025, the average Medicare Advantage plan premium is approximately $17 per month, according to CMS, but that figure masks enormous variation — some plans charge $0 while others charge well over $100. The $0-premium plans that many beneficiaries rely on are almost entirely funded by bonus payments. If those payments shrink or disappear for a given insurer, the $0 premium is often the first thing to go. Watching for CMS announcements about methodology changes in late 2025 and early 2026 will give you the earliest signal of whether your plan's financial footing is shifting.
The ruling also raises questions about CMS's use of what the agency called categorical adjustments during the COVID-19 pandemic. In 2021 and 2022, CMS applied broad upward tweaks to star ratings to prevent plans from being penalized for disruptions in care delivery that were outside their control. Critics argued those adjustments inflated ratings across the board, making it harder to distinguish genuinely high-performing plans from average ones. Clover's case touched on whether CMS had the legal authority to make those kinds of sweeping changes without going through formal notice-and-comment rulemaking — the process that requires the agency to publish proposed rules, accept public feedback, and respond to substantive comments before finalizing changes. If courts ultimately determine that CMS overstepped, future methodology changes may require that full rulemaking process, which takes longer and gives beneficiary advocates a formal seat at the table.
For beneficiaries who use star ratings as a shopping tool during the Annual Enrollment Period, this legal uncertainty creates a real practical challenge. Medicare's Plan Finder at Medicare.gov displays star ratings prominently, and many seniors use the four-star filter as a first screen when comparing plans. If the underlying methodology is contested and potentially subject to revision, those ratings may not fully capture a plan's quality trajectory. One way to look deeper is to examine the individual measure scores that make up the overall rating — CMS publishes these in detail on its Part C and D Performance Data page. You can see, for example, whether a plan scores well on controlling blood pressure and poorly on member complaints, or vice versa. A plan with a 3.5-star overall rating that excels on the measures most relevant to your specific health conditions may serve you better than a 4-star plan whose score is driven by measures that do not apply to your situation.
Beyond the Annual Enrollment Period, Medicare Advantage enrollees have two additional windows to make changes. The Open Enrollment Period runs January 1 through March 31 each year and allows anyone currently in a Medicare Advantage plan to switch to a different Medicare Advantage plan or return to Original Medicare with a stand-alone Part D drug plan. This window is particularly relevant if CMS announces star rating recalculations that cause your plan to revise its benefits or announce a market exit after the December 7 deadline has passed. Separately, qualifying life events — including moving to a new county, losing employer-sponsored coverage, or your plan leaving the market — trigger a Special Enrollment Period that lets you switch outside the standard windows entirely. If your plan sends you a notice of material benefit changes or a market exit, that notice itself is your signal to act.
Beneficiaries who want to track how this legal dispute develops should watch for two specific CMS publications. The first is the annual Medicare Advantage and Part D proposed rule, which CMS typically releases each fall and which would contain any formal methodology revisions. The second is the annual call letter CMS sends to insurers each spring, which sets the parameters for the following plan year and sometimes includes star rating guidance. Advocacy organizations including AARP and the Medicare Rights Center submit formal comments during rulemaking periods and publish plain-language analyses of proposed changes — their websites are practical resources for understanding how policy shifts might affect your coverage before they take effect.
State insurance regulators have a limited but real role in this landscape. While CMS sets the federal rules for Medicare Advantage, state insurance commissioners handle consumer complaints about marketing abuses and benefit misrepresentations. If you believe your plan has misrepresented its star rating, its benefits, or its network in its marketing materials, filing a complaint with your state insurance department is a concrete step. You can also call 1-800-MEDICARE, which is 1-800-633-4227, to report concerns, request help comparing plans, or get assistance understanding a notice you have received from your insurer. That line is staffed around the clock and the assistance is free.
CMS is likely to respond to the Clover ruling through one of several paths: appealing the decision, revising its cut point methodology through formal rulemaking, or issuing updated guidance that addresses the court's concerns while preserving the existing framework. Each path has a different timeline and a different set of consequences for plan ratings. An appeal could keep the current methodology in place for another year or more while litigation continues. A formal rulemaking would take at least 12 to 18 months and would give the public an opportunity to comment. Updated guidance could move faster but might face its own legal challenges if it is seen as insufficiently explained. The most likely scenario is that any meaningful change to star rating calculations would first appear in plan year 2027 ratings, though CMS could signal its direction earlier.
The broader lesson from this case is that the star rating system, despite its consumer-friendly presentation as a simple one-to-five scale, rests on a complex and legally contestable statistical foundation. The ratings you see on Medicare.gov are the output of dozens of methodological choices that CMS makes each year — choices about which measures to include, how to weight them, and where to draw the lines between categories. Those choices have enormous consequences for insurers, and as this case demonstrates, they can be challenged in court. For beneficiaries, the most durable protection against any of these shifts is a habit of active comparison: using Plan Finder each fall before December 7, understanding your enrollment windows, and knowing that if your plan changes or exits, you have options and a defined window to use them.