The University of Toronto Students’ Union (UTSU) has lost more than $1.6 million on its health and dental plan over the course of six years, according to an investigation by StudentCare. StudentCare is an insurance broker that focuses exclusively on student health plans. “They’ve been engaged by the executive to essentially get a handle on what’s going on with our student plan,” said UTSU president Ben Coleman during a November 28 UTSU Board of Directors’ meeting.
Lev Bukhman, CEO of StudentCare, and Sophia Haque, director of partnerships & development, were also present for the meeting, at which they delivered a presentation on their findings.
“StudentCare will be working with the UTSU as a broker, helping to ensure that pricing for insurance remains competitive,” Coleman told The Varsity, adding, “one of the best things they offer is their open and accountable culture of reporting, meaning that the UTSU board would always be more aware of how the health and dental plans were performing, instead of being in the dark.” The UTSU’s board was hitherto uninformed about the deficits.
Previously, the UTSU relied on Morneau Shepell for brokerage; their agreement with Morneau Shepell was terminated last year and the union began to deal directly with the insurance provider, Green Shield. Green Shield is a not-for-profit company that provides health and dental coverage to the UTSU members. The company works with the National Student Health Network, one of the services offered by the Canadian Federation of Students (CFS). $100,000, –or one per cent of the premiums paid by students, goes to CFS-Services. This is in addition to the membership fees that the CFS already collects from the UTSU.
Coleman also told The Varsity that StudentCare also offers other services to students, such as “[allowing] students to get pharmacy discounts at Shopper’s Drug Mart (as opposed to the CFS service of discounts at independent pharmacies, which are harder for students to find).” Coleman also pointed to the fact that StudentCare’s communication team “would allow us to provide flyers on health plan coverage in multiple languages, a huge improvement for international students who may have to explain coverage to their parents,” while the CFS only provides material in French and English. As of press time, the CFS did not respond to a request for comment.
StudentCare’s analysis
The agreement that the UTSU has in place with Green Shield is a refund accounting system, also known as retention accounting. This means that if the premiums paid by students are greater than administrative costs and the claims paid by Green Shield, then the surplus is transferred to the UTSU’s reserve funds at the end of the year.
If the costs and the claims are greater than the premiums paid by students, the UTSU is then responsible for paying the deficit to Green Shield. “[On] the risk spectrum, [retention accounting is] a significant dial forward because in a retention accounting plan, the UTSU as the plan sponsor, as the policy holder, as the contract holder, is actually ultimately responsible for the financial performance for the plan,” said Bukhman during his presentation to the UTSU board of directors.
In 2010, the UTSU had approximately $1.2 million in its reserve funds, and according to Bukhman, these funds have been exhausted. In five of the past six years, the plan has caused the union to run a deficit, incurring losses totaling more than $1.6 million. The UTSU still owes $154,000 to Green Shield.
Bukhman attributes this to a rising number of claims on the plan. Dental claims, in particular, have increased by 60 per cent over the past five years. He noted that a rate of utilization is not inherently a bad thing, and the problem lay in the refund accounting system that has been put in place. “We want to draw a very clear distinction between encouraging students’ use of the plan and having a high level of utilization is different from having a financial risk model that the UTSU chooses to put in place to manage that claim experience,” explained Bukhman.
In order to pay off the debt owed to Green Shield and accommodate the rising number of claims, premiums have increased by 31 per cent over the past five years, from $216 to over $282.
“[The UTSU has] had to increase premiums substantially to try to make up for that loss,” Bukhman told The Varsity, “b ut despite the increases, they still incurred more losses.” Furthermore, Bukhman said that he did not see any evidence of a competitive bidding process for quotes on premiums or evidence that the UTSU considered other underwriting methods over the past 10 years. According to Bukhman, a request for quote (RFQ) process is “a standard and a prudent practice to make sure that you have a cost competitive, and [you’re] accountable to your membership in making sure you sort of have the best possible deal for them.”
“As far as we can tell, the plan has been renewed every year with Green Shield, the insurance company, without an exploration — first of all, looking elsewhere for other possibilities — or exploration of alternative underwriting methods or packages.”
Going forward
Aside from the health and dental plan, the UTSU also offers accidental death & dismemberment (AD&D) insurance, as well as travel insurance, through Western Life. Bukhman explained that switching the AD&D and travel plan to StudentCare’s plan in January would save the UTSU around $20,000. “[It] isn’t earth-shattering but it’s better than having to pay that $20,000 for no extra reason,” said Haque. Bukhman, however, advocated against changing the health and dental plan in the middle of the year. “Tens of thousands of students use the plan all a time,” he said. “Changing insurance companies is operationally disruptive.”
For the future, Bukhman told the board that the UTSU should consider a fully insured plan, under which the UTSU would only be responsible for paying the premiums and the insurance company would only be responsible for paying out claims. “It appears to be in our analysis that refund accounting has not been so far to date a phenomenal choice for the UTSU,” explained Bukhman, “and perhaps, you can look at the pros and cons of other models, particularly, fully insured, which would be a model that minimizes — in fact, has no liability — for the UTSU at all.”
Bukhman also encouraged the UTSU to engage in an RFQ process. This, according to Bukhman, “ensures for students that all the homework has been done, all the diligence has been done to make sure they have the lowest cost plan and the best services.”
Coleman confirmed that the UTSU would be transitioning to StudentCare’s AD&D and travel packages at the start of the next semester, and that the union will conduct an RFQ process over January and February.
Bukhman stated that more analysis still needs to be done, especially regarding the claims data. Bukhman also suggested collecting feedback from students in order to “make an informed decision about what kind of a model, potentially what kind of insurance company you’re working with going forward.”
With files from Ahmed-Zaki Hagar
