A federal judge has dismissed Humana (NYSE: HUM) lawsuits against the U.S. Department of Health and Human Services (HHS) and the Centers for Medicare and Medicaid Services (CMS).
The company filed a lawsuit in October 2024, challenging CMS' Medicare Advantage (MA) quality score. Humana claimed that government agencies act “arbitrarly and on a whim” when downgrading their ratings, affecting bonus payments and overall revenue. He also described the program's data and calculations as “dizzy and complicated.”
On July 18th, Texas Judge Reed O'Connor ruled that Humana's case was premature as he had not yet obtained the results of the CMS appeal. CMS reported that Humana's appeal was denied six months after the company filed a court complaint.
Initially, the insurance company sought a judge's decision by December, allowing renewals to be incorporated into bids for the 2026 contract year.
The lawsuit focused on the obligation to “follow resolved basic rules for agency decision-making under the Administrative Procedure Act (APA), particularly to implement those regulations using reason and logic, and to follow common sense protocols regarding data integrity and agency transparency.”
Humana emphasized that star ratings are important to the MA program. This is because it provides agents, brokers and beneficiaries with important information about the quality of the plan and helps them compare plans during the annual registration period.
Humana is one of the nation's largest insurance companies, with nearly 6 million Medicare Advantage (MA) members in its Health Plan. Centrewell is Humana's provider services division, including home hygiene, pharmacy and primary care.
On October 10, 2024, CMS issued a 2025 star rating, significantly reducing the number of MA plans with a high star rating compared to the previous year. The lawsuit noted that while the ratings for 2024 have already dropped significantly, the number of MA subscribers has increased sharply from 15.89% in 2024 to 27.71% in 2025.
Before the ratings were announced, Humana said it had participated in the CMS's planning preview period. It states that several measures have revealed changes in the institution's methodology that have “suddenly and substantially upwardly moved, significantly below the star rating.”
“Humana was denied the opportunity to determine why the measurement level cutpoints were very suspicious in their 2025 scores or to verify the accuracy of the CMS calculations. Despite CMS's own regulations, they are seeking to plan sponsorship of the underlying data for the CMS.
Humana's shares fell 3% following the judge's decision, with Bloomberg analysts estimated they could lose between $1 billion and $3 billion in 2026 due to low government rebates associated with the decline in ratings.
The lawsuit was dismissed without prejudice, and Humana could sought further legal action.
“The decision showed that the court lacked jurisdiction to hear the case because Humana had not exhausted its optional administrative appeal process at the time of filing,” a Humana spokesman said in a statement. “But as of today, we have exhausted the administrative appeal process at CMS. We will consider all legal options available, including either a (court) order or a revision of the case.”
