UC files lawsuit against UC SHIP consulting firm Aon Hewitt

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The UC Board of Regents filed a lawsuit Tuesday against Aon Hewitt, alleging the firm’s “negligent” actuarial and consulting services caused the UC Student Health Insurance Plan to run a deficit of more than $57 million over the past three years.

The suit, filed in Alameda County Superior Court, seeks to reclaim as much of the $57.41 million deficit as possible, along with the costs the university paid for Aon Hewitt’s services.

“The University believes that Hewitt — not students or the University — should bear responsibility for Hewitt’s grossly negligent and reckless conduct,” said UC spokesperson Brooke Converse in an email.

The lawsuit details Aon Hewitt’s involvement in planning UC SHIP as far back as 2008, when the firm was involved in the UC Graduate Student Health Insurance Plan work group in determining whether a consolidated systemwide plan would be feasible and fiscally sensible.

The suit specifically mentions the names of a handful of Aon Hewitt employees — Doug Grabham, Brian Bloom and Ian Stark — who worked on developing UC SHIP.

The suit alleges, among other problems, that Aon 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.”

It also claims Stark, the primary actuary responsible for projecting costs and calculating premiums for GSHIP, “frequently missed deadlines, failed to complete deliverables” and failed to respond to requests from UC SHIP director Heather Pineda.

Numerous sections of the document, mainly quotes from internal Aon Hewitt communications, are redacted. The UC system is seeking to have an unredacted complaint released.

“As a policy, we do not comment on pending legal matters,” said Aon Hewitt spokesperson Maurissa Kanter. “However, calculating health care cost projections is a very complex process and involves many factors, including the quality of data we receive from our clients and their carriers. Plan design, data, communication and utilization can all contribute to variation in projected plan expenses.”

The systemwide UC SHIP was first implemented in the 2010-11 school year for graduate students before it was expanded to undergraduates the next year. During the 2011-12 plan year, UC officials began to realize claims would not cover expenses, and they brought in new actuaries to review the data.

Although Aon Hewitt originally had suggested that a consolidated, self-funded plan would save $7 million to $10 million in its first year, the complaint states, a January report prepared by Alliant Health Services, an actuarial firm hired to consult for UC SHIP management, found the plan had accumulated a $4.83 million deficit in its first year.

Alliant’s report said that the data provided to Aon Hewitt to construct the health plan were “fragmented, missing enrollment counts and generally incomplete” and that Aon Hewitt failed to regularly monitor plan performance unless engaged by UC SHIP management.

“(Aon Hewitt) claimed to be experts in this, and we believed them,” Converse said. “We let them lead the way because we were under the impression that they were leaders in this industry.”

Mitchell Handler covers higher education. Contact him at [email protected] and follow him on Twitter @mitchellhandler.