When players move up a level they're number of stars go down by 1. They still have the same qualities but they are being 'judged' at a higher level.

Star ratings are always related to Team Level. You can see this too when looking at other teams players. If, as a level 2 team, you look at a level 3 team and see a 5 star player in his team, to him its a 4* player, and to another viewer who's level 5 its a 3* player......same player.