Humana is facing another setback in court, adding to its financial and reputation troubles just weeks before new Medicare Advantage star ratings are finalized by the U.S. government. On Tuesday, a federal judge in Fort Worth, Texas, upheld the government’s decision to lower Humana’s quality scores for its Medicare Advantage plans. This ruling could cost the insurance company billions in bonus payments.
The dispute centers on three failed customer service calls, which led to the drop in Humana’s Medicare quality rankings. These star ratings evaluate aspects like customer service, preventive care, and chronic disease management. The scores play a big role in determining how much federal funding private insurers receive for managing Medicare plans.
Humana argued that the rating cut was unfair because the failed calls involved non-English-speaking beneficiaries who couldn’t connect to a live representative through an interpreter service. CMS, the government agency overseeing Medicare, disagreed, saying Humana “hung up” on all three callers. CMS described the lawsuit as a way for Humana to avoid responsibility for poor customer service.
The Louisville-based insurer covers about 17 million Americans and says it plans to improve its star ratings and get back to top performance quickly. This latest court loss follows another setback in July, when a previous case was dismissed on procedural grounds. After Tuesday’s ruling, Humana’s stock dropped nearly 5 percent and has fallen about 12 percent over the week. The decline worsened after Goldman Sachs gave the company a “sell” rating, predicting a slow recovery for Humana’s Medicare and Medicaid businesses.
An estimate from a Washington policy firm suggests Humana could lose up to $3 billion in bonus payments depending on its 2025 and 2026 star ratings. For context, Medicare Advantage star bonuses totaled at least $12.7 billion industrywide this year. Higher star ratings allow insurers to get more government money, which they can use to lower premiums or offer extra benefits like dental and vision care. These benefits are important in a market where many seniors choose plans based on quality scores.
Other big insurers like UnitedHealth Group, Elevance Health, and SCAN Health Plan have successfully contested their ratings in court recently. In fact, UnitedHealth managed to overturn the impact of a single disputed call in 2024, which boosted its stock by 8 percent in a day. Humana’s defeat stands out because it suggests CMS is taking a firmer stance on defending its rating methods.
Some experts say the star ratings system is too complicated, with many measures that don’t clearly reflect patient outcomes. Critics argue that billions of dollars hinge on issues as small as one dropped phone call, raising questions about the fairness and accuracy of the system. A conservative think tank has even called for scrapping the star ratings entirely, claiming the bonuses don’t always match real quality.
This ruling shines a light on the tough balance between holding insurers accountable and ensuring fairness in scoring. Humana may still appeal the decision, but the message is clear for those in the Medicare Advantage market: even small mistakes can lead to huge financial consequences.