Cornerstone Research worked with two actuaries in this case to assess the actuarial services provided to the university system for its student health plan.
A university system claimed that an actuarial consultant gave allegedly negligent advice that caused its student health plan to accumulate a significant funding deficit over three years. Defense counsel retained Cornerstone Research and experts to provide analysis and testimony on actuarial issues related to healthcare plans.
Cornerstone Research worked with Mr. Jeffrey Petertil, an independent healthcare actuary; and Mr. Cecil Bykerk, a former president of the Society of Actuaries.
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, we supported 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. Professor Bundorf explained the fundamental economic features of health insurance plans and the possible causes of a funding shortfall. 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.
In addition to supporting the defendant’s experts in their analyses, Cornerstone Research staff reviewed the actuarial 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 actuarial experts.
The case settled shortly after trial began.