October 29, 2026

In a lawsuit filed Thursday, Centene argued that federal regulators used illegal measures to determine 2027 stars, causing the insurer’s rating to slip and threatening hundreds of millions of dollars in revenue. A court ruled 20 measures were illegal in spring, yet CMS still used some in calculating scores for all insurers except Clover Health. Other insurers such as Alignment Healthcare and Healthfirst have filed suits as well.

Starting in 2028, the changes would require ACA enrollees seeking enhanced tax credits and cost-sharing reductions to verify income, citizenship, and residential information before financial assistance kicks in. Currently, enrollees who appear eligible can receive assistance while their documentation is verified. The CMS estimates the rule would prompt over 330,000 people annually to leave the exchanges, cementing the enrollment collapse that began after enhanced subsidies expired last year.

CVS Health is suing CMS to challenge the methodology used to calculate its 2027 Medicare Advantage star ratings, arguing that improperly adopted measures lowered its scores and could cost the company more than $2 billion in revenue in 2028. The percentage of CVS members enrolled in plans rated four stars or higher fell from 84% in 2026 to 67% in 2027, prompting the lawsuit, which seeks to have ratings for 43 contracts recalculated. CVS joins at least four other insurers pursuing similar legal challenges, potentially increasing pressure on CMS to reform its star ratings methodology.

Centene is recovering profitability faster than expected, raising its 2026 adjusted earnings outlook to greater than $5.20 per share and anticipating its Medicare business will break even a year earlier than planned. Improved Medicaid reimbursement rates, higher ACA premiums, and lower-than-expected Medicare costs supported results, despite elevated Medicaid spending and an 8% year-over-year decline in membership. Centene also reduced its workforce by nearly 6,000 employees in the third quarter, incurring almost $280 million in severance costs, with the cuts expected to support margin expansion in 2027.

If substantiated, the allegations raise questions about insurers’ incentives to cooperate and whether the administration bypassed established regulatory processes in pursuing its anti-fraud agenda.