Humana is suing US health agencies

Humana Inc., one of the largest private Medicare Advantage insurers in the US, has filed a lawsuit against US healthcare companies over recent cuts to key Medicare quality measures. The lawsuit is an attempt to overturn a decision that has already hurt its stock price and threatens to cost it billions of dollars in revenue.

Humana filed the lawsuit on October 18 in federal court in northern Texas, presided over by Judge Reed O'Connor. The company claims that the US Medicare system has acted in an “arbitrary and unreasonable” manner in calculating its metrics for the health plans offered by Humana.

Metrics, called stars, play a key role in determining multibillion-dollar bonus payments. The latest downgrade spells bad news for Humana's 2026 earnings targets, and one analyst called it a “worst case scenario” for the Louisville, Kentucky-based insurer.

Humana tried to resolve the case directly with the officials before filing a lawsuit. The company asked for transparency about the policies, procedures, and calculations that go into making rate determinations by authorities.

In addition, the company also requested to correct the perceived errors. The matter was not resolved, leading to legal action being taken against the company.

Such legal consequences are not unprecedented in the health insurance industry. For example, Elevance Health Inc. it has already won court cases over the low scores on some of its Medicare operations. UnitedHealth Group Inc., the largest seller of private Medicare Advantage plans, has a similar lawsuit pending.

The case could have a wider impact on the health sector as well, according to a Bloomberg report. Now it could change the way the Medicare quality score is calculated and will be used going forward. The competitive balance of insurers offering Medicare Advantage can also be affected.

Representatives of the US Centers for Medicare and Medicaid Services have not commented on the case.

The legal battle comes after news reports that Cigna has begun merger talks with Humana.

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