Alignment Healthcare (ALHC) said Thursday that it expects its California HMO plan, which provides health insurance to seniors enrolled in Medicare, to receive a lower star rating for 2027 from the federal government.

The company expects its contract serving roughly 75% of its health plan membership to receive a 3.5-star rating for 2027, down from 4.0 stars in 2026. Alignment also expects to maintain a 4.0-star or higher rating across its six other eligible plans, it said.

Alignment said the California plan's decline was primarily due to higher industry thresholds and weaker results on certain triple-weighted health outcomes and Part D measures.

The California-based insurer plans to appeal against certain calculations used by the Centers for Medicare & Medicaid Services and pursue litigation challenging some star rating measures and methodologies, the company said in a filing.

The rating change is not expected to impact its revenue for fiscal years 2026 or 2027 but will affect quality bonus payments for fiscal 2028, the company said.

Provider risk-sharing arrangements are expected to offset part of the impact, it added.

ALHC shares were down more than 23% in Friday premarket trading.