(Reuters) -A Texas federal judge dismissed a lawsuit brought by health insurer Humana challenging the U.S. government's reduction in its star ratings for government-backed Medicare plans.
The ruling, which may hit the government's bonuses to Humana next year, dragged shares nearly 3% lower in morning trading. Shares of other insurers, including UnitedHealth and Centene , were also down between 1.5% and 2.3%.
The judge dismissed the lawsuit against the Department of Health and Human Services after finding
that Humana had failed to exhaust all of its out-of-court options to challenge the ratings.
The U.S. Centers for Medicare and Medicaid Services (CMS) issues star ratings, from one to five stars, for private insurers' Medicare Advantage plans to help beneficiaries choose their plans.
Plans with higher star ratings also receive higher payments from the government if they keep costs below certain targets.
In its lawsuit, Humana had challenged what it called the federal government's "arbitrary and capricious actions" in administering the Medicare Advantage and Part D Star Ratings program.
The company had sought administrative reconsideration of its 2026 Quality Bonus Payment determination for twenty-nine contracts.
Humana is one of the largest providers of Medicare Advantage plans in the U.S., which are funded by the Medicare health insurance program for seniors and some disabled people but administered by private insurers.
(Reporting by Mrinalika Roy in Bengaluru; Editing by Leroy Leo)
