Cornerstone Research worked with four experts in this case involving actuarial consulting on a university system’s student health plan.
A university system claimed that an actuarial consultant gave allegedly negligent advice that caused a student health plan to accumulate a significant funding deficit over three years. Defense counsel retained Cornerstone Research and four experts to provide analysis and testimony on healthcare and actuarial issues.
Cornerstone Research worked with healthcare experts Professor M. Kate Bundorf of the Stanford School of Medicine, and Professor Daniel P. Kessler of the Stanford Graduate School of Business, also a Cornerstone Research senior advisor. In addition, we supported Mr. Jeffrey Petertil, an independent healthcare actuary; and Mr. Cecil Bykerk, a former president of the Society of Actuaries.
Professor Bundorf explained the fundamental economic features of health insurance plans and the possible causes of a funding shortfall. She also reviewed the actuarial consultant’s advice to the university system to self-insure its student health plan. She determined that the move to self-funding was a reasonable decision for the university, but that there were substantial deficiencies in the university’s implementation of the plan that likely contributed to its poor financial performance.
Professor Kessler assessed the potential damages incurred by the university as a result of the consultant’s recommendation to self-insure and alleged actuarial errors. He showed that the alleged errors had a limited impact on the premium shortfall and that the damages model presented by the university’s actuarial expert greatly overstated any damages resulting from the alleged negligence.
Mr. Petertil reviewed the actuarial work performed by the consultant for the university. He opined that the consultant acted within the scope of its role and responsibilities. He also found that its analysis of expected medical costs and its advice on student health insurance premiums were reasonable.
Mr. Bykerk provided background on the actuarial profession, in particular, its inherently judgment-based nature. He explained how the consultant’s conduct should be assessed in light of the guidance set forth by professional actuarial organizations, and concluded that its work was consistent with what one would expect of a reasonable and careful actuary under the circumstances.
In addition to supporting the defendant’s experts in their analyses, Cornerstone Research staff reviewed the expert analyses submitted by the university and identified significant errors. We also assisted counsel leading up to trial, including preparing for the cross-examination of the plaintiff’s experts.
The case settled shortly after trial began.