A Texas judge upheld Medicare ratings, costing Humana billions in bonuses.
A federal judge has ruled against Humana in its legal battle with the U.S. Department of Health and Human Services over the 2025 Medicare Advantage star ratings, a decision that could cost the insurer billions in government bonus payments. The ruling by U.S. District Judge Reed O’Connor in Fort Worth, Texas, rejected Humana’s claim that the Centers for Medicare & Medicaid Services (CMS) had unfairly rated its Medicare Advantage plans. The company’s score dropped from 4.5 stars to 3.5 stars, a downgrade that affects nearly half of Humana’s Medicare Advantage members.
Medicare Advantage plans are an alternative to traditional Medicare, allowing private insurers to provide coverage for seniors. While these plans can offer lower costs and added benefits, they often have stricter networks and require approval for some treatments. Around 70 million Americans depend on Medicare, and about half of them choose the private Medicare Advantage route. Because CMS rewards higher-rated plans with larger federal payments, these ratings play a direct role in how much insurers can spend on benefits and premium reductions.
Humana argued in its July lawsuit that the new rating would cause serious financial harm by reducing the bonus payments it receives from the federal government. These bonuses are typically used to offer lower premiums or extra benefits, so a lower score can make a plan less appealing to consumers. The company claimed the CMS rating process was flawed, pointing to a test that measured how its customer service handled calls from people with limited English proficiency. Humana said that evaluation unfairly hurt its overall rating.
The court disagreed. Judge O’Connor sided with the Department of Health and Human Services, ruling that CMS had followed the proper process. The decision marks a setback for Humana, which had hoped to reverse the downgrade and recover the lost payments. Finance expert Michael Ryan told Newsweek that the decision highlights a larger issue with how the Medicare Advantage system works. According to Ryan, the “bonuses” companies receive aren’t always tied to genuine improvements in care but instead reflect how well insurers can maneuver within the system’s rules. He said Humana’s drop from 4.5 to 3.5 stars represents a significant hit, impacting nearly half of its Medicare Advantage business.
Humana released a statement expressing disappointment in the court’s ruling but reaffirmed its goal of improving performance and regaining a higher star rating. The company said it remains dedicated to providing affordable, high-quality care and will explore all available legal options to ensure future CMS ratings reflect consistent and accurate evaluations.
Financial experts say the loss could have broad effects beyond Humana. Alex Beene, a financial literacy instructor at the University of Tennessee at Martin, noted that every reduction in star ratings can cost insurers billions in missed bonuses and lost enrollment. He predicted that the ruling might not end Humana’s legal fight but will pressure the company to tighten operations and improve its performance metrics in the coming years.
Kevin Thompson, CEO of 9i Capital Group, added that Humana’s financial strain could trickle down to customers. If government payments decline, insurers often compensate by raising premiums or cutting certain benefits. Thompson said the case reveals the tension between profit-driven insurance companies and a public health program designed to serve older adults. In his view, this conflict leaves patients vulnerable when companies prioritize shareholders over service quality.
Experts also warn that beneficiaries may notice changes soon. Ryan predicted that many of Humana’s Medicare Advantage members could see higher costs or trimmed benefits next year, not because of worsening care, but because the federal payments that funded those perks have been reduced. He called it a wake-up call for the Medicare Advantage system, suggesting that the industry has grown dependent on government bonuses that don’t necessarily reflect actual patient outcomes.
The decision could reshape how insurers approach Medicare Advantage performance going forward. For now, Humana faces the difficult task of restoring its reputation and ratings, while millions of seniors wait to see how those changes affect their coverage.
Sources:
Major health insurer dealt legal blow over Medicare Advantage ratings
Medicare Advantage Quality Bonus Payments Will Total at Least $12.7 Billion in 2025
Humana Loses Court Battle Over Medicare Advantage Ratings, Billions In Payments At Risk
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