Claims Resolution and Settlements: MSA and Annuities

Medicare Set Asides
Under federal law,  Medicare is precluded from paying the medical expense for a person's workers' compensation injury.  The Center for Medicare and Medicaid Services requires all Medicare (CMS) beneficiaries to protect Medicare's interest in all work comp claims and ensure Medicare is secondary to work comp.  Therefore, it is required of the adjuster to take Medicare's interest into account every time a work comp claim is settled.  On small claims this amounts to the adjuster paying the estimated future medical cost.  

Where things get  interesting is on the larger claims.  If the employee is a Medicare beneficiary at the time of the settlement and the total settlement is over $25,000, or if the employee has a reasonable expectation of Medicare enrollment within 30 months of the settlement and the total settlement is greater than $250,000, a Workers' compensation Medicare Set Aside (MSA) proposal must be submitted to the Center for Medicare and Medicaid Services for their pre-approval of the settlement.


If Medicare's
 interest is not protected, and the CMS determines Medicare made improper payments, it can seek recovery not only from the employee but also from the employer.  If CMS determines the failure to take Medicare's interest into consideration was intentional, it can recover double the amount paid out. 

Therefore,  it is recommended an expert in Medicare Set Aside Trust be retained on all claims meeting these thresholds.  The MSA expert evaluates the employee's medical condition, medical history, and potential future medical cost, along with an evaluation of the employee's current and future disability.  The MSA proposal should be submitted to CMS and the settlement delayed until the settlement has been approved by the CMS.

It is recommended  CMS approval be obtained whenever possible.   When CMS approval is not obtained, the settlement agreement/release must contain language verifying Medicare's interest was considered and protected in the settlement.  Source:  http://blog.reduceyourworkerscomp.com/?p=32  Medicare Set Asides Blog.

Structured Settlements/Annuities
In conjunction  with the MSA, it is often wise to conclude the large workers' compensation claims through the use of a structured settlement or an annuity.  With this type of settlement of a workers' compensation claim, the employee receives an immediate cash settlement plus a stated number of future payments at stated intervals.  The future payments are funded by the employer or the insurance carrier purchasing an annuity from a life insurance company, with the future payments made directly to the employee.

When the  employee has anticipated future medical needs, the structured settlement can prevent the employee from spending the entire settlement before the future medical cost is incurred.  As a part of the structured settlement process, a life care plan should be prepared showing the anticipated future medial cost and the approximate dates of the medical expenses.  A "spend thrift" MSA Trust can be established as part of the structured settlement protecting the employee from wasting their settlement and protecting the employer from a CMS claim for medical expenses spent by Medicare. (workersxzcompxzkit)

The structured  settlement benefits the employer or the insurance company by establishing a set amount for the future exposure of the claim.  The total future cost of the claim can be paid and the need to carry reserves for the claim is eliminated with the purchase of the structured settlement.


Author Robert Elliott
,
executive vice president, Amaxx Risks Solutions, Inc. has worked successfully for 20 years with many industries to reduce Workers' Compensation costs, including airlines, health care, manufacturing, printing/publishing, pharmaceuticals, retail, hospitality and manufacturing. He can be contacted at: Robert_Elliott@ReduceYourWorkersComp.com.

Our Work Compensation Book click here: www.WCManual.com

 

Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker about workers' comp issues.

©2009 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact Info@ReduceYourWorkersComp.com

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