Humana Files Lawsuit Over HHS's Recent Medicare Advantage Audit Rules

HUMANA FILES LAWSUIT OVER HHS'S RECENT MEDICARE ADVANTAGE AUDIT RULES

Humana Files Lawsuit Over HHS's Recent Medicare Advantage Audit Rules
September 1st, 2023

Humana is contesting a newly imposed CMS regulation which aims to tighten audit procedures for Medicare Advantage (MA) plans.

On September 1st, Humana, the second-largest MA insurer in the country, presented its case to the U.S District Court in the Northern District of Texas. The insurer requests that CMS reconsider and withdraw the newly finalized rule, emphasizing potential negative impacts on both Medicare Advantage providers and the senior citizens who rely on the MA program for their health services.

At the start of the year, CMS announced its intention to omit the fee-for-service adjuster during the risk adjustment data validation audits. This adjuster previously served to determine acceptable payment error margins, ensuring that only errors surpassing this threshold would be pursued in recoveries. This rule modification is set to be implemented for contracts originating in 2018 and later.

With the introduction of this revised audit process, CMS anticipates the possibility of recouping around $4.7 billion from MA plans over the next ten years due to overpayments. It's worth noting that various major insurance companies have, in the past, faced accusations related to Medicare Advantage discrepancies, though the industry has consistently refuted these claims.

In their lawsuit, Humana argues that CMS's updated audit process infringes upon the stipulations of the Administrative Procedure Act. Humana has pointed out that, "The CMS failed to substantiate their newly introduced auditing procedures with either empirical evidence or actuarial assessments. Instead, they relied on legal arguments that don’t appear robust upon close examination."

The broader insurance sector had reservations about this rule when CMS initially introduced it in 2018. Many insurers, Humana included, had expressed intentions of pursuing legal routes if the rule excluded the critical fee-for-service adjuster.

Earlier this year, Bruce Broussard, CEO of Humana, articulated his concerns about CMS's decision to remove the fee-for-service adjuster from MA plan audits.

A report from Bloomberg in January underscored Humana's potential vulnerability due to these clawbacks. The report suggested that up to 17% of Humana's earnings in 2023, equivalent to approximately $900 million, could be subjected to these new rules. As of June 30, Humana reported nearly 5.8 million members enrolled in Medicare Advantage, with aims of enrolling an additional 825,000 by year's end.
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A spokesperson from CMS has chosen not to comment, citing the ongoing litigation.