Blue Cross and Blue Shield of Florida, Inc. v. Department of Health and Human Services

District of Columbia

Blue Cross and Blue Shield of Florida, Inc. v. Department of Health and Human Services

CourtDistrict Court, District of Columbia

DecidedMay 16, 2025

DocketCivil Action No. 2024-3609

StatusPublished

This text of Blue Cross and Blue Shield of Florida, Inc. v. Department of Health and Human Services (Blue Cross and Blue Shield of Florida, Inc. v. Department of Health and Human Services) is published on Counsel Stack Legal Research, covering District Court, District of Columbia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

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Blue Cross and Blue Shield of Florida, Inc. v. Department of Health and Human Services, (D.D.C. 2025).

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Opinion

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA _________________________________________ ) BLUE CROSS AND BLUE SHIELD OF ) FLORIDA, INC., et al., ) ) Plaintiffs, ) ) v. ) Case No. 24-cv-03609 (APM) ) DEPARTMENT OF HEALTH AND HUMAN ) SERVICES, et al., ) ) Defendants. ) _________________________________________ ) MEMORANDUM OPINION

I. INTRODUCTION

Plaintiffs Blue Cross and Blue Shield of Florida, Inc. and Florida Blue Medicare, Inc. bring

this suit under the Administrative Procedure Act (“APA”), 5 U.S.C. § 551 et seq., against

Defendants Department of Health and Human Services (“HHS”), Centers for Medicare &

Medicaid Services (“CMS”), and the heads of those agencies. 1 Plaintiffs challenge the Extreme

and Uncontrollable Circumstances Rule, 42 C.F.R. §§ 422.166(i), 423.186(i), which allows

Medicare insurance plans to avoid a reduction of their “Star Ratings” when “extreme and

uncontrollable circumstances” negatively affect operational and clinical systems. Every year,

CMS rates Medicare insurance plans on a one- to five-star scale to reflect a plan’s quality of care

and services. Plaintiffs contend that the Extreme and Uncontrollable Circumstances Rule is

arbitrary and capricious because, to qualify for ratings relief, the Secretary of Health and Human

Services (“Secretary”) must declare a public health emergency and waive certain requirements,

1 The court automatically substitutes as Defendants the current Secretary of HHS, Robert F. Kennedy, Jr., and the current Administrator of CMS, Dr. Mehmet Oz. See Fed. R. Civ. P. 25(d). two conditions that cannot be reconciled with the Rule’s purpose. Further, Plaintiffs claim that the

Extreme and Uncontrollable Circumstances Rule is at odds with other CMS rules about Medicare

plan requirements during natural disasters and leads to dissimilar treatment of similarly situated

Medicare plans.

The parties have cross-moved for summary judgment. For the reasons explained below,

the Court denies Plaintiffs’ Motion for Summary Judgment, ECF No. 10, and grants Defendants’

Cross-Motion for Summary Judgment, ECF No. 12.

II. BACKGROUND

A. Statutory and Regulatory Background

1. Medicare and Star Ratings

Medicare is a federal program that provides health insurance benefits for elderly and

disabled Americans. See 42 U.S.C. § 1395 et seq. The Medicare program is administered by CMS,

a component of HHS. Elevance Health, Inc. v. Becerra, 736 F. Supp. 3d 1, 4 (D.D.C. 2024) (citing

Johnson v. Becerra, 668 F. Supp. 3d 14, 17 (D.D.C. 2023)). Medicare is divided into four different

parts—“Parts A and B of the program make up the traditional Medicare system under which CMS

directly reimburses healthcare providers.” Id. (citing 42 U.S.C. §§ 1395c, 1395j). Parts C and D

“permit individuals to receive their Medicare benefits through private insurers.” Id. Part C is

known as “Medicare Advantage,” or “MA,” and it allows Medicare recipients to opt into private

insurance paid for, or at least subsidized by, the government. 42 U.S.C. § 1395w-21;

UnitedHealthcare Ins. Co. v. Becerra, 16 F.4th 867, 872 (D.C. Cir. 2021). Lastly, Part D creates

prescription drug plans (“PDPs”), which “offer[] subsidized prescription drug insurance coverage

. . . to beneficiaries who enroll in traditional or Part C plans.” Elevance Health, 736 F. Supp. 3d

at 4 (citing 42 U.S.C. § 1395w-101(a)(1)).

2 MA insurers “receive in advance a monthly lump sum from CMS for every beneficiary that

they enroll, without regard to the services that the beneficiaries will actually receive.”

United Healthcare, 16 F.4th at 873; see 42 U.S.C. § 1395w-23(a)(1)(A), (C). Related to this

payment structure, MA plans submit a bid representing their overall estimated costs in providing

Medicare benefits to members for the coming year. 42 U.S.C. § 1395w-23(a)(1)(B); 42 C.F.R.

§ 422.254; see also United Healthcare, 16 F.4th at 873–76. If the bid submitted by the MA plan

is lower than a benchmark set by CMS based on traditional Medicare spending per enrollees, CMS

returns a portion of the savings to the plan as a “rebate,” which it can then use to fund additional

benefits or reduce premiums. See 42 U.S.C. §§ 1395w-23(a)(1)(E), (n), 1395w-24(b)(1)(C);

42 C.F.R. §§ 422.258, 422.260.

Each year, CMS rates MA plans and PDPs on a scale of one to five stars based on data

collected by CMS. 42 U.S.C. § 1395w-23(o)(4)(A); see also id. § 1395w-22(e)(3). The “Star

Ratings” system “is designed to provide information to the beneficiary that is a true reflection of

the plan’s quality and encompasses multiple dimensions of high quality care.” Medicare Program;

Contract Year 2019 Policy and Technical Changes, 83 Fed. Reg. 16,440, 16,519 (Apr. 16, 2018)

(codifying the regulatory framework for Star Ratings). Prospective Medicare plan members may

view the ratings online in the Medicare Plan Finder, which displays all plans available to the

Medicare beneficiary and their Star Rating. See 42 C.F.R. §§ 422.166(h), 423.186(h).

CMS also ties plan ratings to financial incentives through the Quality Bonus Payment

program. First, plans rated four stars or higher are given an increased benchmark against which

to bid, which in turn may increase the rebate they receive. 42 U.S.C. §§ 1395w-23(o)(1), (3)(A)(i),

1395w-24(b)(1)(C); 42 C.F.R. § 422.260. Second, higher-rated plans can keep a larger portion of

the difference between their bid and benchmark as a rebate. Plans at or above 4.5 stars retain 70%

3 of the difference as a rebate, plans rated at least 3.5 stars but less than 4.5 stars retain 65%, and

plans at or below 3.5 stars retain only 50%. See 42 U.S.C. § 1395w-24(b)(1)(C)(v); 42 C.F.R.

§ 422.266(a)(2)(ii). Finally, a plan that consistently receives Star Ratings below three stars may

be terminated from the Medicare program. See 42 C.F.R. §§

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