Humana Loses BILLIONS, Humana Medicare Advantage Ratings Lawsuit, Judge Crushes Medicare Lawsuit TWICE Millions Of Seniors At Risk

Humana just suffered a devastating legal blow that could cost the insurance giant up to $3 BILLION and leave millions of Medicare Advantage members scrambling. In a shocking double dismissal, a federal judge rejected Humana’s desperate lawsuit challenging Medicare star ratings—not once, but TWICE. The Humana Medicare Advantage lawsuit collapse threatens to upend healthcare coverage for 25% of its members who just lost their 4-star protection.

The Shocking Truth Behind Humana’s Medicare Star Ratings Catastrophe

Humana’s average star score plummeted from 4.37 in 2024 to 3.63 for 2025—the largest drop of any major Medicare Advantage insurer. This dramatic decline triggered legal proceedings that captured national attention.

The insurance giant argued that CMS acted “arbitrarily and capriciously” in calculating the ratings. Humana described the program’s data and calculations as “dizzyingly complex” and claimed it was denied an opportunity to validate the accuracy of CMS’ calculations.

What Are Medicare Advantage Star Ratings?

Medicare Advantage star ratings measure health plan quality on a scale from 1 to 5 stars. These ratings evaluate:

Member experience with the health plan
Customer service responsiveness
Management of chronic conditions
Access to preventive services
Member complaints and appeals handling

Why ratings matter: Plans achieving 4 stars or higher receive quality bonus payments from Medicare, which directly translate to enhanced benefits for members and competitive advantages in the marketplace.

Court Delivers Crushing Double Blow: Two Dismissals and Mounting Losses

First Dismissal: July 2025

U.S. District Judge Reed O’Connor dismissed Humana’s initial lawsuit on July 18, 2025, ruling that the case was “premature” because Humana had not exhausted the administrative appeals process before filing suit.

The judge determined that existing case law requires courts to evaluate alleged harms “at the time of the action brought”. Since Humana filed its lawsuit before receiving the CMS appeal decision, the court lacked jurisdiction.

Key details of the first dismissal:

Court: Northern District of Texas
Dismissal type: Without prejudice (allowing refiling)
Stock impact: Humana’s stock fell 3% following the decision
CMS appeal status: The agency denied Humana’s appeal in April, six months after the initial complaint was filed

Second Dismissal: October 2025

After the first dismissal, Humana refiled its complaint to address procedural concerns. However, Judge O’Connor dismissed the case again on October 14, 2025, this time with prejudice, meaning it cannot be refiled but could still be appealed.

The second ruling focused on the merits of Humana’s claims. Judge O’Connor determined that CMS’ no-callbacks policy is legal, and therefore the regulators’ ratings of several dropped calls were not arbitrary or capricious.

Humana Loses BILLIONS, Humana Medicare Advantage Ratings Lawsuit, Judge Crushes Medicare Lawsuit TWICE—Millions of Seniors at Risk

The Customer Service Call Controversy

A central issue in Humana’s legal challenge involved how CMS evaluates foreign language interpreter services.

The testing method: CMS makes test calls that require a translator and rates them as completed successfully or unsuccessfully.

Humana’s complaint: The insurer challenged lowering its stars based on three allegedly mishandled customer service phone calls.

Court’s perspective: The judge ruled that CMS’ methodology for assessing call center performance, including the no-callbacks policy, complies with established regulations and does not constitute arbitrary decision-making.

BILLIONS at Stake: The Staggering Financial Meltdown

The star ratings downgrade carries severe financial consequences for Humana and its members.

Revenue Impact

Analysts estimate that Humana could lose $1 billion to $3 billion in 2026 as a result of the star ratings drop. This massive revenue reduction stems from lost quality bonus payments tied to the rating system.

Membership Affected

Only 25% of Humana’s Medicare Advantage members are in a plan with four stars or above in 2025, compared to 94% the previous year. This represents a catastrophic shift affecting millions of beneficiaries.

The Business Context

Star ratings affect bonus payments to Medicare Advantage insurers that they use to increase benefits and attract new members. Plans of 4 stars and higher earn bonuses. The Medicare Advantage market represents an estimated $500 billion industry.

Legal Arguments Presented by Both Sides

Humana’s Position

The insurance company’s lawsuit raised several key arguments:

Cut point manipulation: Humana accused CMS of playing fast and loose with cut points, or the threshold for reaching each star level
Lack of transparency: The insurer claimed CMS failed to let it verify star ratings calculations
Methodological changes: Humana discovered changes to the agency’s methodology where several measures were “moved abruptly and substantially upward, significantly depressing star ratings”
Data validation concerns: The company argued it couldn’t determine why measure-level cut points moved unexpectedly in the 2025 scores

CMS’ Defense

The federal agency maintained that:

All calculations followed established regulations and methodology
The ratings system underwent proper notice-and-comment rulemaking
Quality measure changes were transparent and properly implemented
The no-callbacks policy for customer service testing is legally sound

Broader Context: Industry-Wide Star Ratings Challenges

Humana wasn’t alone in challenging the 2025 star ratings. The insurer followed UnitedHealth Group and Elevance last fall in filing a lawsuit against CMS and HHS over the star ratings results.

UnitedHealth’s outcome: UnitedHealth won its lawsuit in late 2024. CMS appealed and then dropped the appeal, suggesting some vulnerability in the rating system’s implementation.

The Numbers Tell the Story

Thirty-four Medicare Advantage plans earned 5 stars in the 2025 ratings for 2026, compared with only seven plans for the 2025 plan year and 38 contracts that received 5 stars for 2024.

This volatility in ratings distribution raises questions about system stability and predictability for both insurers and beneficiaries.

What This Means for Medicare Advantage Beneficiaries

Current Policyholders

If you’re enrolled in a Humana Medicare Advantage plan:

Your coverage continues: The lawsuit dismissal doesn’t affect your current benefits or coverage
Potential benefit reductions: Lower star ratings may result in reduced supplemental benefits in future plan years
Premium changes: You might see premium adjustments as Humana works to offset lost bonus revenue
Quality monitoring: Continue tracking your plan’s performance through Medicare’s official Plan Finder tool

Future Enrollment Considerations

When selecting Medicare Advantage plans:

Check current star ratings on Medicare.gov
Review how ratings have changed year-over-year
Consider plan stability and financial strength
Compare benefits across multiple highly-rated options
Consult with a licensed insurance advisor about your specific needs

Humana’s Response and Future Plans

Following the October 2025 dismissal, a Humana spokesperson stated: “We are disappointed with the Court’s ruling but remain committed to delivering meaningful improvements to our Star measurements and returning to top quartile performance as quickly as possible”.

Company Strategy Moving Forward

During its June investor day, Humana executives said they submitted Medicare Advantage bids for 2026 assuming they did not win the suit. The insurer expects it won’t achieve the total points required for a four-star rating until the 2028 bonus year.

This timeline suggests:

Multi-year recovery period
Significant operational changes underway
Continued financial pressure on the business
Potential service adjustments for members

Comparing Similar Medicare Advantage Litigation Cases

UnitedHealth’s Victory vs. Humana’s Defeat

The contrasting outcomes highlight different legal strategies and timing:

Factor	UnitedHealth	Humana
Timing	Completed appeals process first	Filed before appeal completion
Outcome	Won lawsuit	Lost twice (dismissed)
CMS Response	Appealed then dropped	Defended successfully
Procedural Status	Followed proper exhaustion	Premature filing initially

Lessons from Other Insurers

Other Medicare Advantage providers facing similar star ratings challenges may learn from Humana’s procedural missteps, particularly the importance of exhausting administrative remedies before pursuing federal litigation.

The Regulatory Framework: Medicare Advantage Quality Ratings System

Understanding the legal requirements helps contextualize Humana’s legal challenges.

Key Regulations Governing Star Ratings

The star ratings system operates under:

Fair Labor Standards Act (FLSA) principles for employee-related measures
Social Security Act provisions for Medicare program administration
Administrative Procedure Act (APA) standards for agency rulemaking
CMS Final Rules establishing specific methodology and cut points

Changes to Methodology

In its original lawsuit, Humana argued there were potential errors in CMS’ calculations of its results and industry cut points. The company’s reduction in star ratings was driven by narrowly missing higher industry cut points on a small number of measures.

This cost the company more than $1 billion in bonuses distributed to plans scoring 4 stars or higher.

Expert Analysis: Why the Court Ruled Against Humana

Legal experts point to several factors in the unfavorable rulings:

Procedural Requirements

Federal courts require plaintiffs to exhaust administrative remedies before seeking judicial review. This doctrine serves important purposes:

Allows agencies to correct their own errors
Develops a complete factual record
Prevents premature judicial intervention
Respects agency expertise and authority

Substantive Standards

Under the Administrative Procedure Act, courts review agency actions deferentially. CMS’ decisions receive deference unless they are:

Arbitrary and capricious
Not in accordance with law
Unsupported by substantial evidence
Procedurally defective

The court found CMS met all legal requirements in calculating and applying the star ratings.

Frequently Asked Questions About the Humana Medicare Advantage Lawsuit

Can Humana appeal the October 2025 dismissal?

Yes. Although the case was dismissed with prejudice (meaning it cannot be refiled in district court), Humana can appeal to the U.S. Court of Appeals for the Fifth Circuit. The company indicated it is considering “all available legal options.”

How does this affect my Humana Medicare Advantage plan?

The lawsuit dismissal doesn’t immediately change your current coverage or benefits. However, lower star ratings may result in reduced supplemental benefits, higher premiums, or fewer bonus features in future plan years as Humana receives fewer quality bonus payments from Medicare.

What are Medicare Advantage star ratings and why do they matter?

Medicare Advantage star ratings evaluate health plan quality on a 5-star scale based on customer satisfaction, care quality, and member experience. Plans with 4+ stars receive quality bonus payments from Medicare, which insurers use to enhance benefits, reduce premiums, and improve services for members.

Were there errors in how CMS calculated Humana’s star ratings?

Humana alleged errors in CMS calculations and methodology changes. However, the federal court ruled that CMS’ calculation methods, including the no-callbacks policy for customer service testing, were legal and not arbitrary or capricious. The court found no evidence of improper conduct by the agency.

How much money could Humana lose due to lower star ratings?

Analysts estimate Humana could lose between $1 billion and $3 billion in revenue during 2026 due to reduced quality bonus payments. This represents a significant financial impact on the second-largest Medicare Advantage insurer in the United States.

Did other Medicare Advantage insurers sue over star ratings?

Yes. UnitedHealth Group and Elevance Health also filed lawsuits challenging their 2025 star ratings. UnitedHealth won its lawsuit in late 2024, though CMS initially appealed before dropping the appeal. This suggests some insurers successfully challenged the ratings methodology.

What happens next for Humana policyholders?

Humana policyholders should:

Monitor plan communications for any benefit changes
Review star ratings annually during open enrollment
Compare alternative plans if concerned about quality
Consult with licensed insurance advisors about coverage options
Stay informed about Humana’s quality improvement initiatives

Implications for the Medicare Advantage Industry

The Humana Medicare Advantage lawsuit dismissals send important signals to the healthcare insurance industry:

Precedent for Future Challenges

Courts will strictly enforce procedural requirements, particularly exhausting administrative remedies before seeking judicial review. Insurers considering legal challenges must complete all CMS appeal processes first.

Rating System Stability

Despite industry pushback, federal courts have validated CMS’ authority to implement and modify the star ratings methodology. This strengthens the agency’s position in setting quality standards.

Financial Planning Considerations

Medicare Advantage insurers must build greater contingency into financial planning to account for potential star ratings volatility and resulting revenue fluctuations.

Conclusion: Navigating the Aftermath of the Lawsuit Dismissals

The double dismissal of the Humana Medicare Advantage lawsuit represents a significant legal setback for the insurance giant and establishes important precedent for healthcare litigation. While Humana explores appeal options, the immediate impact includes billions in lost revenue and reduced competitive positioning in the Medicare Advantage marketplace.

For Medicare beneficiaries, understanding these developments helps inform enrollment decisions and expectations about future plan benefits. The star ratings system, despite its controversies, remains the primary tool for evaluating Medicare Advantage plan quality.

Key Takeaways

Humana’s lawsuit was dismissed twice—first for being premature, then on the merits
The company faces $1-3 billion in lost revenue from lower star ratings
Federal courts validated CMS’ rating methodology and no-callbacks policy
Medicare beneficiaries should monitor plan ratings annually during open enrollment
The precedent emphasizes exhausting administrative remedies before federal litigation

Additional Resources

For more information about Medicare Advantage and healthcare litigation:

Medicare Plan Finder: Compare star ratings at Medicare.gov
CMS Star Ratings Information: Official methodology documentation
State Health Insurance Assistance Programs (SHIP): Free local counseling

About the Author

Sarah Klein, JD, is a licensed attorney and legal content strategist with over 12 years of experience across civil, criminal, family, and regulatory law. At All About Lawyer, she covers a wide range of legal topics — from high-profile lawsuits and courtroom stories to state traffic laws and everyday legal questions — all with a focus on accuracy, clarity, and public understanding.
Her writing blends real legal insight with plain-English explanations, helping readers stay informed and legally aware.
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