(Bloomberg) -- The US government is updating crucial quality ratings for private Medicare plans, paving the way for 2025 bonus payments worth hundreds of millions of dollars to insurers that operate health plans for seniors.

The Centers for Medicare and Medicaid Services will recalculate the five-star quality rating system following specific guidelines outlined in a court decision, according to an emailed statement Friday. The updated ratings will determine bonus payments for Medicare Advantage plans for 2025. 

The CMS announcement follows legal wins last week by health insurers SCAN Health Plan and Elevance Health Inc. against the Department of Health and Human Services. The insurers had filed suit against the agency, arguing that regulators used flawed methods to determine the ratings.

Medicare, the government health program for the elderly, uses the star system as a quality measure to help older Americans choose plans that do a better job of improving their health. Plans with higher ratings are given additional funding from CMS and can use that money to lower costs for beneficiaries, making their plans more appealing to customers.

Bonus payments can have a significant impact on a company’s financial success. The changes from CMS provide insurers with a much-needed boost, as the Medicare Advantage business is already facing challenges such as increasing medical costs. 

The news was first reported by the Wall Street Journal. Insurer shares were little changed in trading before US markets opened. 

(Updates with additional details from CMS.)

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