Boat graphic – Archive

In early January 2012, Aon Hewitt — the former consulting and actuarial firm for the UC Student Health Insurance Plan (UC SHIP) — allegedly failed to provide accurate financial data and services to the UC system. The university claims that this led the 10 campuses to incur a deficit of $57.41 million over two years. Receiving backlash from the UC community about the accumulated health care debt, the UC Board of Regents and UC SHIP struggled to retain its crew, which led to six campuses opting out.

On Oct. 1, the UC regents filed a lawsuit with the Alameda Superior Court against Aon Hewitt for “negligent and reckless” conduct, which potentially threatened the financial viability and existence of UC SHIP. The university seeks to refund the incurred deficit and attribute sustained damages to UC SHIP’s former consulting firm through legal action.

Based on actuarial analyses, Hewitt made claims that it would save the university system up to $10 million in the first year alone by switching over to the self-funded UC SHIP. In reality, Hewitt’s financial miscalculations led to a deficit of $4.83 million, according to a report by Alliant Health Services.

“For example, Hewitt overestimated the cost savings that would result from pooling the

campus plans by using aggressive assumptions in projecting the cost savings associated with a system-wide plan. In doing so, Hewitt assumed that mere pooling of the different campus plans into a system-wide plan would change the spread of risk that the University would face,” reads the lawsuit.

The lawsuit cites Doug Grabham, Brian Bloom and Ian Stark as the primary consultants of Aon Hewitt, who partook in financial dealings for UC SHIP back in 2010. In a letter dated 2008, Mr. Bloom was described as “Project Lead,” Nicolas Billard as “Actuarial Support” and Mr. Grabham as a “National Student Health Expert” during early negotiations.

A representative from Aon Hewitt responded in a media release that health cost projections are determined through various factors: “Plan design, data, communication and utilization can all contribute to variation in projected plan expenses.”

Although the UC relied on Hewitt’s continuous claims of creating a cost-efficient health plan for students, the company’s calculated contribution rates were insufficient to cover the overall cost of fueling UC SHIP.

If the UC regents win the case, according to UC Media Relations’ Brooke Converse, “The funds would go to repay the debt, the legal fees and expenses related to evaluating and redesigning SHIP.”