This Medicare Advantage Lawsuit Could Affect Benefits in 2027

Medicare Advantage shoppers could see a big change in plan ratings and benefits in 2027 thanks to a recent lawsuit.

A small insurer successfully challenged Medicare in court over how the agency rates Medicare Advantage plans.

With this year's open enrollment period of Oct. 15 to Dec. 7 on the horizon, it's important to understand the implications of the lawsuit if you want to keep your retirement plan on track.

How the government rates Medicare Advantage plans

To understand the ripple effects of this lawsuit, it helps to first understand how Medicare Advantage plans get rated.

The Centers for Medicare & Medicaid Services (CMS) assigns each Medicare Advantage plan a star rating based on criteria like member satisfaction and health outcomes.

That rating matters because it determines eligibility for quality bonus payments and larger rebates that the federal government provides to Medicare Advantage carriers to build their benefits packages. Lower ratings mean lower funding, which typically means reduced benefits, lower enrollment, or in some cases, a carrier pulling a plan from certain counties altogether,  something that has already happened in parts of the country in 2026.

Clover Health sues CMS and wins

A relatively small Medicare Advantage carrier called Clover Health sued CMS, arguing the agency's decision to lower the star rating on its PPO plan was unjustified and cost the company roughly $120 million in missed bonus payments. Nearly all of Clover's Medicare Advantage members are enrolled in that PPO plan, so the stakes were high.

Clover's PPO rating had dropped from 4 stars to 3.5 stars for the 2026 plan year. A federal judge in Georgia sided with Clover, ruling that CMS improperly included 20 measures in its rating calculation, and ordered the agency to redo it.

CMS has since recalculated Clover's rating, and the outcome was more dramatic than a simple reversal. Clover's PPO plan jumped all the way to 4.5 stars, a full point above where it started. Its HMO plan, which wasn't even part of the lawsuit, also rose from 4 stars to 4.5 stars under the same recalculation.

The impact is already spreading beyond Clover

Unlike a typical single-company ruling, this one didn't stay contained. CMS voluntarily announced it would recalculate 2027 quality bonus payment ratings for other Medicare Advantage contracts as well, not just Clover's, removing measures the court found the agency didn't have authority to use.

That hasn't settled things, though. In July 2026, insurance giant Elevance Health sued CMS, arguing the agency didn't apply the same recalculation standard to its plans that it gave Clover. Elevance says the discrepancy is costing it roughly $115 million in 2027 bonus payments across several of its contracts. More insurers may follow with similar challenges.

CMS, for its part, hasn't fully conceded the fight: CMS has appealed the ruling while continuing to comply with the court's order during the litigation.

What this could mean for your plan in 2027

Medicare expert Jae Oh, author of "Maximize Your Medicare," told TheStreet he's skeptical that many five-star plans are going to return to the market, even though the broader rating methodology, which was set to get notably tighter heading into 2027, now appears likely to change depending on the litigation and CMS's final policy decisions.

CMS also extended the deadline for insurers to file their 2027 plan bids, giving the agency more time to sort through the implications before finalizing next year's offerings.

Things won't change for the rest of 2026

None of this affects your current 2026 Medicare coverage. That stays exactly as-is for the remainder of the year. And because insurers are still finalizing their 2027 bids, this year's turmoil won't be reflected in official numbers until CMS publishes 2027 star ratings in October.

The most important lesson for Medicare beneficiaries

Nobody is able to predict exactly how this is going to shake out by the time open enrollment arrives, but the past few months are a good reminder that Medicare Advantage ratings, and the benefits tied to them, could shift quickly and unexpectedly.

These are annual contracts. Auto-renewing your current plan might feel convenient, but benefits, provider networks, and drug coverage could all change year to year, and this year is shaping up to be a bigger-than-usual example of that.

Get help before choosing a Medicare Advantage plan

The annual Medicare Advantage open enrollment period begins in October. But don't wait until then to start educating yourself about coverage options.

The official CMS website offers information about the various types of plans on its "Compare types of Medicare Advantage plans" webpage.

If you need more guidance, consider tapping into expert help at your local State Health Insurance Assistance Program (SHIP). There, you have access to free one-on-one counseling from a Medicare expert.

Bottom line

When it comes to choosing a Medicare Advantage plan, it's important to make the right moves. A good Medicare plan is invaluable, especially if you frequently need medical care.

It remains to be seen how the Clover Health lawsuit might impact benefits in 2027. For now, educate yourself about your Medicare Advantage options and keep a close eye on developments.

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