Clover Insurance v. HHS: S.D. of Georgia Holds 20 Star Ratings Measures Unlawful

On May 27, 2026, the U.S. District Court for the Southern District of Georgia issued a sweeping decision in Clover Insurance Company v. HHS that could ultimately lead to the invalidation of nearly half of all Star Ratings measures and, potentially, lead the Centers for Medicare & Medicaid Services (CMS) to seek statutory changes to Medicare law.

Clover Insurance — a Medicare Advantage organization — filed its challenge in federal court in the fall of 2025, arguing that the 3.5 Star Rating awarded to it by CMS for the upcoming year was less than the 4 Star Rating it deserved. More consequentially for the industry at large, Clover argued that its rating was improperly based on 20 measures that should never have been included in the agency’s calculations.

While the court did not adopt or substantively address each of the five separate theories set forth in Clover’s motion for summary judgment, the two it accepted (that CMS overreached beyond statutory data source limitations and failed to engage in proper notice-and-comment procedures) were enough to cause the court to invalidate 20 challenged measures as applied to Clover’s 2026 Star Rating.

Context: Clover’s Two Successful Arguments for Invalidating Star Ratings Measures

1. Statutory Data Source Limitation

Applicable Measures: Medication Adherence, Diabetes (D08); Medication Adherence, Hypertension (D09); Medication Adherence, Cholesterol (D10); Phone Call Center (C33); Phone Call Center (D01); Appeals Decisions (C32); Rating of Drug Plan (D05); Getting Needed Drugs (D06); Medication Therapy Management Completion (D11); and Pharmacy Statin Use (D12).

Under this theory, Clover argued that the plain text of 42 U.S.C. § 1395w-23(o)(4)(A) — which provides that “[t]he quality rating for a plan shall be determined according to a 5-Star rating system (based on the data collected under section 1395w-22(e) of this title)” — exclusively limits CMS to data collected under the HEDIS, HOS, and CAHPS systems administered through Section 1395w-22(e)’s quality improvement program. Clover argued that the ten challenged measures improperly relied on prescription drug event data, call center monitoring, contractor-generated data, and Part D authority, none of which fall within that statutory boundary. CMS argued that “based on” does not imply an exhaustive limitation, but rather that CMS has the discretion to consider data not collected pursuant to Section 1395w-22(e).

The district court acknowledged the ambiguity of the term “based upon,” but after extensive discussion of statutory interpretation, ultimately agreed with Clover, holding that “based upon,” read in statutory context, does operate as an exclusive limitation. The court noted that Congress knew how to grant the Secretary discretion to consider data beyond a specified source, and its choice not to do so in Section 1395w-23(o)(4)(A) favored Clover’s interpretation. The court declined to follow earlier precedent from the federal district court in D.C., emphasizing that the earlier case was decided on Chevron deference grounds, which is no longer available following the Supreme Court’s 2024 decision in Loper Bright.

Citing the Supreme Court’s decision in Bostock, the court also examined legislative history, noting that when Congress codified the five-star rating system in 2010, it deliberately dialed back the Secretary’s previously broad discretion to “utilize whatever measures he or she deems fit.”

2. Notice-and-Comment Procedural Challenge

Applicable Measures: Improving Mental Health (C05); Reducing Falling (C15); Getting Needed Care (C22); Rating of Health Care Quality (C25); Care Coordination (C27); Improving Bladder Control (C16); Annual Flu Vaccine (C03); Improving Physical Health (C04); Getting Care Quickly (C23); and Customer Service (C24).

Clover challenged an additional ten measures on procedural grounds, arguing that CMS was required to undergo formal rulemaking before incorporating them into Star Rating calculations. Section 1395hh(a)(2) of the Medicare Act requires that any policy establishing or changing a substantive legal standard related to benefits, payment for services, or provider and beneficiary eligibility must be formally promulgated through notice-and-comment rulemaking. The court held that this requirement was triggered here because Star Ratings measure specifications qualify as “statements of policy” because these specifications “let the public know the agency’s current adjudicatory approach” in calculating ratings for Medicare Advantage plans nationwide. The specifications also establish a “substantive legal standard” insofar as they serve as a ‘deciding principle’ for payments and rebates plans receive from CMS, effectively determining the financial rights of Medicare Advantage organizations.

The Court’s Decision, Implications, and Next Steps for Medicare Advantage Organizations

Ultimately, the court found that CMS’s inclusion of ten measures in Clover’s 2026 Star Rating calculation triggered the notice-and-comment requirements of Section 1395hh(a)(2), and because CMS failed to undertake the required rulemaking, Clover’s 2026 Star Rating calculation was found to be procedurally defective. Separately, the court held that the plain text of 42 U.S.C. § 1395w-23(o)(4)(A), read alongside surrounding statutory provisions, supports the conclusion that CMS may only base its quality rating calculations on measures using data collected under Section 1395w-22(e), and that CMS erred in considering ten additional measures that relied on impermissible data sources.

As a result, Clover’s 2026 Star Rating was set aside, and CMS was ordered to recalculate it in a manner consistent with the court’s order — though the court declined to simply direct CMS to assign Clover a 4-Star rating, leaving it to the agency to determine how best to implement the decision.

While the scope of the court’s decision is explicitly limited to rectifying Clover’s 2026 Star Rating, the implications for the broader industry are likely unavoidable.

Notably, the court’s findings regarding the statutory data limitations are not procedural and cannot be resolved through rulemaking alone; CMS may need Congress’s support in adjusting applicable laws.

The day after the ruling, on May 28, 2026, CMS moved for reconsideration, arguing the court mistakenly declined to consider their reply brief because it treated the filing as untimely despite having previously granted an extension through May 13, 2026. The agency has asked the court to reconsider and enter judgment in their favor. Further proceedings — including an appeal and a motion to stay the order pending appeal — should be anticipated.

Medicare Advantage organizations should assess their contracts and current Star Ratings to determine whether the exclusion of the specified measures (D01, D05, D06, D08, D09, D10, D11, D12, C32, C33, C03, C04, C05, C15, C16, C22, C23, C24, C25, and C27) would revise their scores in any way. This will allow plans to assess the potential impact should this decision stand and CMS takes industry-wide action. Recall that in the wake of prior Stars lawsuits, CMS re-calculated Stars scores across the industry and could feasibly do the same here. In addition, organizations should evaluate whether they have grounds to bring similar claims.

Crowell is available to advise Medicare Advantage organizations on appropriate actions to take in light of this decision.