SCAN HEALTH PLAN v. DEPARTMENT OF HEALTH AND HUMAN SERVICES

SCAN Health Plan, a California nonprofit Medicare Advantage organization serving over 435,000 members, filed this complaint for declaratory and injunctive relief against HHS and CMS on October 26, 2026, challenging the agency's determination of SCAN's 2027 Star Ratings for four of its plan contracts (H5425, H0976, H0978, and H1822). SCAN alleges that CMS calculated those ratings using ten quality measures (identified as C03, C04, C05, C15, C16, C21, C22, C23, C24, and C26) that were never promulgated "by regulation" through notice-and-comment rulemaking as required by 42 U.S.C. § 1395hh(a)(2), and instead were issued solely through sub-regulatory Technical Notes that CMS revises annually at its discretion. SCAN's legal theory rests on the holding in Clover Ins. Co. v. HHS, No. 2:25-cv-142, 2026 WL 1483515 (S.D. Ga. May 27, 2026), in which the Southern District of Georgia held that the same ten measures were procedurally invalid because they establish substantive legal standards governing payment for services under 42 U.S.C. § 1395hh(a)(2) and had not been issued by regulation. The court in that case ordered CMS to recalculate Clover's Star Rating without those measures. CMS subsequently extended Clover relief from all 20 measures addressed by that court's two holdings for the 2027 plan year while declining to extend relief to other plans, including SCAN. On October 1, 2026, SCAN formally requested that CMS recalculate its 2027 Star Ratings for all four contracts without the ten disputed measures. CMS denied that request on October 7, 2026. CMS assigned contracts H0978 and H1822 ratings of 3.5 Stars and contracts H5425 and H0976 ratings of 4.0 Stars. SCAN alleges those assignments should instead be 4.0 and 4.5 Stars respectively, and that the difference costs SCAN over $152 million in statutorily mandated payments. The financial stakes arise from the ACA's integration of Star Ratings into two payment formulas. Under 42 U.S.C. § 1395w-23(o), plans rated 4.0 Stars or higher receive a 5 percent benchmark increase. Under 42 U.S.C. § 1395w-24(b)(1)(C), the rebate percentage escalates from 50 percent for plans rated 3 Stars and below, to 65 percent for plans rated 3.5 to 4.0 Stars, and to 70 percent for plans rated 4.5 to 5 Stars. SCAN asks the court to vacate the 2027 Star Ratings for all four contracts and order CMS to recalculate them without reliance on the ten measures, with corresponding rebate relief.