Michael Stack: Hello, Michael Stack here. Principal of Amaxx, founder of COMPClub, and co-author of “Your Ultimate Guide to Mastering Worker’s Comp Costs”. One of the core philosophies that I believe is that a better outcome for your injured worker will lead to lower worker’s compensation costs for your organization. Again, a better outcome for your injured worker will lead to lower worker’s compensation costs for your organization. And structured settlements certainly fall under that criteria and that philosophy. I have a special guest joining me today, the Senior Vice President of National Marketing at Ringler Associates, Duke Wolpert. Duke, thanks for joining me. I’d love for you to share with me what is a structured settlement, a little bit of context there.
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What is a Structured Settlement?
Duke Wolpert: Sure Mike, my pleasure. Thanks for having me today on the program. A structure settlement, essentially, is a cost-effective alternative to a lump sum settlement, a cash settlement. The series of tax-free future periodic payments, established between an insurer or self-insurer, and an injured party, a claimant or plaintiff, as part of either a worker’s compensation settlement, or a personal injury settlement.
They’re designed to protect and offer security to injured parties, so that they can meet their financial obligations in the future. Essentially, they bridge the gap to settlement, and any way parties can move closer to settlement by simply a change in the way the settlement is funded certainly is a step in the right direction.
Michael Stack: Absolutely. I agree with that, and I think these points you made are very good ones. Alternative to cash, really that lump sum settlement as an alternative to that, this point I think the tax free periodic payments in really a strong benefit to this, and then not to really be understated is that protection and security issue that really those structures offer throughout that settlement process, so thanks for sharing those point, Duke. Now, tell me, really how are these used then in the worker’s compensation space, really to leverage these benefits that you mentioned?
How Are Structured Settlements Used in Workers’ Compensation?
Duke Wolpert: Yeah, what we’re seeing in the worker’s compensation space is a growing use of structured settlements, when it comes to the funding of Medicare set aside allocations. In addition to the MSA, the Medicare set aside allocation, oftentimes there are non-Medicare allowable expenses that aren’t part of the Medicare set aside allocation cost projection, that need to be quantified, and many times, we actually structure those non-Medicare allowable expenses as well as the MSA’s that we see.
On the indemnity side of the cases, we oftentimes are pulled into permanent and total claim scenarios, widow benefits, minors, in catastrophic claims, burns, amputations, traumatic brain injuries, for instance, are certainly cases that we’re asked to get involved in, to customize proposals that assist in meeting the financial needs of the injured parties in the future.
On occasion, we see situations involving injured parties with drug dependency, or competency issues, folks that for one reason or another cannot manage their own money, and there is certainly a value, the funding of those settlements with periodic payments and structured settlements.
Finally, the use of the structured settlement is growing in conjunction with the growth of Medicaid entitlement and the Medicaid programs in the states. In order to protect entitlements for Medicaid recipients, oftentimes the funding of the settlement has a direct correlation with their eligibility status, so the funding of a settlement would be using periodic payments, a structured settlement, certainly provides some protection to injured parties when it comes to ongoing incontinuity of Medicaid entitlement.
Michael Stack: I think a couple of things that you said there … this competency issue, and we talked about it in regards to drug dependency, but I think we hear these stories so often of the lottery winners who get this huge sum of money, and a couple of years later, the people go bankrupt, and it’s just a very common story, and I think the value here is really in that protection, which we talked about in those benefits initially, and these catastrophic cases that Duke mentioned … I think very valuable when you really put that in a context of leveraging this for those better outcomes for those injured workers, so let’s talk about that now, Duke. How do we now leverage these tools? How do we leverage this tool then in the context of really creating those better outcomes, both for the injured worker, and then creating those lower worker’s compensation costs?
How Do Structured Settlements Reduce Workers’ Compensation Costs?
Duke Wolpert: Absolutely. When we look at outcomes on the insurance, self-insured side, the primary payer side, oftentimes the use of structured settlements offers a reduction in the pay loss dollars in the claim, the lost dollars associated with a claim file. That oftentimes leads to improved cycle times or closing ratios for claims professionals, and what we find is that it at times avoids unnecessary expenses, especially in cases in litigation, either litigation costs or ancillary expenses related to the litigation, so clearly there’s value from a cost containment and cycle time claim inventory perspective, when it comes to the use of structured settlements.
Michael Stack: I agree. Now, let’s talk about those injured workers, so we’re saving money through the use of these tools in loss dollars and the comparison of using an annuity versus a lump sum payment, and really leveraging the interest that leads to those savings. Now, let’s talk about those injured workers on that perspective and some of those benefits in creating a better outcome for them as well.
How Do Structured Settlements Lead to a Better Outcome For Injured Workers?
Duke Wolpert: Yeah, understanding that the plans that we develop are individually customized, they’re done that way to meet the needs of the injured parties, and every plan is a little different. In conjunction with the structuring and work up for the pricing of the Medicare set aside, there are oftentimes non-Medicare allowable expenses and other needs on the [inaudible 00:06:18] side that we need to address with the injured parties, as well as their own financial needs that will lead to the establishment of the creative design, the structured settlement proposal, and by doing that, it bridges the gap of the settlement. It gets the parties closer to resolving the claim in hand.
Michael Stack: I think that really summarizes it nicely in the sense of really customizing those needs. I think when we talk about objections that injured workers might have, that would be a fear of mine certainly if I was offered a settlement, that I want to make sure that my needs are protected. As you said … I think one of the things you said there was I think was key, was it’s really individual to that individual person. Do they need some money up front to pay for certain things? How much money do they need over time? … And really customizing it to meet those needs, and as we said, at the same time saving those worker’s compensation costs for the payer organizations.
Duke, thanks for joining me. I’d love to just ask to share some final thoughts as we wrap up here.
A Structured Settlement Could Be the Last Check an Injured Party Ever Receives
Duke Wolpert: My final thought would be that we need to remember that an injured party who’s been disabled for a period of time, that receives a settlement, may not be going back to work. This could be the last check, the last payment that they receive for the rest of their lifetime, so protecting their financial future certainly is something that we want to be part of, and structured settlements absolutely do just that.
Michael Stack: Yeah, I couldn’t agree more, and I think that point of really thinking that this is a last check that individual can receive is a very powerful point, and really leveraging this tool to create those better outcomes for that individual person, and as we mentioned, at the same time, lowering those worker’s compensation costs for the payer organizations. Thanks again, Duke for joining me today, and remember, your success in worker’s compensation is defined by your integrity, so be great!
Author Michael Stack, Principal, COMPClub, Amaxx LLC. He is an expert in workers compensation cost containment systems and helps employers reduce their work comp costs by 20% to 50%. He works as a consultant to large and mid-market clients, is co-author of Your Ultimate Guide To Mastering Workers Comp Costs, a comprehensive step-by-step manual of cost containment strategies based on hands-on field experience, and is founder of COMPClub, an exclusive member training program on workers compensation cost containment best practices. Through these platforms he is in the trenches on a working together with clients to implement and define best practices, which allows him to continuously be at the forefront of innovation and thought leadership in workers’ compensation cost containment. Contact: [email protected].
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