A federal judge in Texas recently ordered the Centers for Medicare and Medicaid Services (CMS) to recalculate UnitedHealth Group Incorporated’s UNH Medicare Star Ratings for the 2025 plan year. Jeremy Kernodle of the U.S. District Court for the Eastern District of Texas ruled in favor of UnitedHealthcare in its lawsuit against the CMS.
The judge determined that CMS violated the Administrative Procedure Act of 1946 by incorrectly marking a test call to UnitedHealthcare's call center as unsuccessful, unfairly impacting the company's Medicare Advantage star ratings for 2025. He ordered the agency to recalculate without considering the disputed test call and immediately publish the revised ratings in the Medicare Plan Finder.
However, the judge did not agree with UnitedHealthcare's argument that CMS applied a different standard to it than Elevance Health, Inc. ELV in reviewing its call center. Despite this, the ruling is promising for other Medicare Advantage insurers as well, with pending lawsuits over star ratings.
Why Is it so Important for Insurers?
A single unsuccessful call can prevent a plan from achieving a five-star rating, potentially costing the insurer millions. The UnitedHealthcare ruling may set a precedent for how star ratings are evaluated, particularly regarding the use of private contractors in assessing call center performance. The CMS already started working to reduce the weight of call center metrics in determining final Medicare Advantage star ratings.
Since star ratings influence a plan’s ability to attract new members and secure funding, UnitedHealthcare is now likely to gain significantly more in quality bonus payments for 2026 following the recalculation. UnitedHealth currently has a Zacks Rank #3 (Hold).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
UNH’s success marks the third recent defeat for CMS in star ratings lawsuits, raising hopes for Humana Inc. HUM and Centene Corporation CNC as they challenge their own ratings.
Humana, heavily reliant on Medicare Advantage, saw its 2025 star ratings drop, mainly due to unexpectedly high cut points for individual measures, which the company noted were significantly above the historical trends.
5 Stocks Set to Double
Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Today, See These 5 Potential Home Runs >>UnitedHealth Group Incorporated (UNH) : Free Stock Analysis Report
Humana Inc. (HUM) : Free Stock Analysis Report
Centene Corporation (CNC) : Free Stock Analysis Report
Elevance Health, Inc. (ELV) : Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
