What began as a dispute over a single Medicare Advantage contract in Georgia could ultimately force CMS to rethink how it calculates Star Ratings, distributes quality bonus payments, and governs one of the most financially consequential programs in healthcare.

Those issues were the focus of a recent RISE Health webinar featuring Medicare Advantage experts Melissa Smith, Ana Handshuh, and Kevin Lamb, partner at WilmerHale. The panel explored the potential ramifications of Clover Health v. HHS, a federal court ruling that ordered CMS to recalculate Clover Health's 2026 Star Rating after finding problems with portions of the agency's methodology.

At first glance, the decision appears narrow. The ruling applies only to Clover Health and only to one rating year. But the webinar panelists argued that the court's reasoning could have implications that reach far beyond a single plan.

"The order itself is very narrow," Handshuh said. "It applies to one plan for one year. The reasoning behind it reaches into how CMS has calculated star ratings for essentially the entire program."

That distinction has captured the attention of Medicare Advantage executives, consultants, vendors, actuaries, and investors alike.

Why This Matters Beyond Clover

Star Ratings are among the most influential performance metrics in Medicare Advantage. They affect quality bonus payments, rebate percentages, enrollment growth, marketing opportunities and competitive positioning. For many organizations, even a half-star difference can translate into tens or hundreds of millions of dollars in annual revenue.

For Clover Health, the stakes were significant. According to Handshuh, the company estimated that receiving a 3.5-Star rating rather than the approximately 4-Star rating it expected resulted in roughly $120 million in lost quality bonus and related payments for 2026.

As Smith noted during the webinar, Star Ratings are not merely a quality measurement tool. They have become an "existential revenue lever" for Medicare Advantage organizations.

That reality helps explain why the Clover decision is generating attention across the industry. The case raises questions not only about specific measures but also about CMS's authority, its rulemaking processes, and the legal foundation of the Stars program itself.

Two Challenges to CMS's Approach

The court sided with Clover on two primary issues. The first involved the data sources CMS uses to calculate certain Star measures.

Clover challenged 20 measures included in its 2026 Star Rating, arguing that CMS exceeded its statutory authority by relying on data sources outside those specifically referenced in federal law. The relevant Medicare statute identifies three primary data systems, the Healthcare Effectiveness Data and Information Set (HEDIS), Health Outcomes Survey (HOS) and Consumer Assessment of Healthcare Providers and Systems (CAHPS), as the basis for the Medicare Advantage quality improvement program.

According to Lamb, the court adopted a relatively strict interpretation of that statutory language.

"The data that CMS relies on for its Star Ratings must come from Section 1395w-22(e)," Lamb explained, referring to the statutory provision governing the quality improvement program.

The court ultimately concluded that 10 challenged measures relied on data sources that did not originate from the statutory framework cited in the law. Those measures included several tied to Part D medication adherence, appeals, call center performance and medication therapy management.

As Handshuh summarized, "None of these sources that you see here are part of 1395w-22(e) data, so the court held that none of these could be [used] in Clover's 2026 Star Rating."

The second issue may prove even more consequential.

The court found that CMS's long-standing practice of updating Star measure specifications through technical guidance and sub-regulatory communications may violate Medicare rulemaking requirements.

Because changes to measure specifications can directly affect Star Ratings, and therefore payment levels, the judge concluded that those updates effectively establish substantive legal standards and should be subject to formal notice-and-comment rulemaking.

"If you change the specifications, the Star Rating calculation changes — that's the very definition of establishing or changing a substantive legal standard," Lamb said. "There is a close connection between Star Ratings and payment."

Why the 2018 Stars Rule Didn't Resolve the Issue

CMS has long maintained that the Stars program itself was formally established through rulemaking. The court did not dispute that point.

As Handshuh explained during the webinar, the 2018 Stars rule addressed the overall framework of the program, including the 1-to-5 rating scale, measure categories, weighting approaches and processes for adding new measures.

The dispute centers on a different layer of the program: the detailed specifications that determine how measures are calculated in practice.

"That's the layer that CMS publishes in the technical notes and treats as sub-regulatory guidance," Handshuh said. "And that's the layer that the court still says requires rulemaking — and that never got the rulemaking."

From the court's perspective, the distinction matters because those technical specifications ultimately determine whether a plan earns 3.5 Stars, 4 Stars or 5 Stars, and whether it receives the financial benefits associated with those ratings.

Why CMS Structured the Program This Way

The ruling also highlights a tension that has existed within the Stars program for years.

CMS has argued that it needs flexibility to update measures and specifications regularly to reflect evolving clinical evidence, quality priorities, coding standards and operational realities. The agency has historically relied on technical notes, HPMS guidance and other sub-regulatory mechanisms to make those adjustments efficiently.

The court's ruling challenges that approach. If the decision ultimately survives appeal, CMS could face pressure to move many future specification changes through formal rulemaking. While that may increase transparency and procedural rigor, it could also slow the agency's ability to update measures in response to changing healthcare needs.

CMS argued that such a requirement would be impractical. According to Lamb, the court's response was essentially that if the statutory framework creates operational difficulties, it is Congress, not the courts, that must address them.

Why This Isn't Just a Clover Problem

The broader concern for the industry is whether the court's reasoning could extend well beyond the 20 measures challenged in the lawsuit.

"This list of 10 measures are only the 10 measures that Clover included in their lawsuit," Smith noted. "It is important for non-Clover plans to remember that there are plenty of other measures from similar like data sources that are going to apply to the rest of us as this is administered."

If the logic behind the ruling were applied more broadly, CMS could face difficult decisions about the future structure of the Stars program.

Some measures could require redesign. Others might need formal rulemaking before implementation. Certain data sources could face additional scrutiny. In more extreme scenarios, Congress could be asked to clarify CMS's authority or establish a revised statutory framework.

The implications extend beyond health plans. Providers participating in value-based arrangements tied to Medicare Advantage performance could see changes in quality improvement priorities, care management programs and performance incentives. Technology vendors supporting Stars reporting and analytics may also need to adapt to evolving measurement requirements.

As Handshuh observed, the ultimate outcome could range from a limited recalculation to something far more significant.

"Depending on what we see moving forward," she said, "we would know whether this is a recalculation ... a broader recalculation ... a structural remake of the program, or is it the end of the program."

A Post-Loper Bright Test Case

The Clover ruling arrives at a time when federal agencies are facing increasing judicial scrutiny.

The court's analysis reflects a broader legal environment shaped by the Supreme Court's 2024 decision in Loper Bright, which significantly curtailed the Chevron doctrine that had historically given federal agencies greater latitude when interpreting ambiguous statutes. Without that deference, courts are increasingly willing to independently evaluate agency interpretations of federal law.

Several webinar panelists suggested that Clover may represent one of the first significant healthcare cases testing how courts will approach agency authority in this post-Chevron environment.

If that trend continues, the implications could extend beyond Medicare Advantage and affect other CMS programs that rely heavily on technical guidance, interpretive policies, and sub-regulatory communications.

What Happens Next?

Few observers expect CMS to accept the ruling without a challenge. Smith said it is "all but likely certain" that the agency will appeal to the U.S. Court of Appeals for the Eleventh Circuit.

Lamb outlined a timeline that could stretch one to two years. CMS has 60 days to file a notice of appeal, after which briefing, oral arguments and judicial deliberations could take many additional months. In the meantime, healthcare organizations should watch several key developments.

First, the scope of any appellate ruling will matter enormously. A narrow decision could limit the impact largely to the measures challenged by Clover. A broader ruling could require more substantial changes to the Stars framework.

Second, CMS may begin evaluating prospective changes to data sources, specifications, and rulemaking processes even before litigation is fully resolved.

Third, policymakers may ultimately become involved if courts determine that CMS's current statutory authority is insufficient to support portions of the existing program.

The Bigger Question

The appeal will determine more than the outcome of a dispute between Clover Health and CMS. At stake is a broader question facing healthcare regulators across the industry: how much flexibility federal agencies have to design, update and administer complex quality and payment programs without explicit direction from Congress.

For now, the Medicare Advantage Stars program remains intact. But the Clover decision has exposed just how much of the system rests on statutory interpretation, regulatory authority and procedural choices that are now under direct judicial scrutiny.

For health plans, providers, technology vendors and investors alike, the case has become far more than a dispute over one organization's Star Rating. It is increasingly a referendum on the legal foundations of one of Medicare Advantage's most important performance and payment programs.