5 Solutions to Lifetime Claims in Workers Compensation

 

Lifetime claims and their ongoing wage and medical coverage demands can often be the elephant in the room in a claims office. In a perfect world, claims would settle with ease with an easy agreed indemnity and medical expense. The paperwork would be signed and everyone would move on with their life.
 
Unfortunately, this is an almost impossible scenario. The truth is that lifetime claims are complicated and can be difficult to resolve for a variety of reasons.  A couple of the factors include Medicare Set-Asides (MSAs), failed vocational rehab, and the inability to find new employment.  It is very important to get a MSA approved in order to move forward with full/final redemptions if your claimant also receives Social Security Disability, which is most often the case with a lifetime claim. 
 
Carriers now see that settling one factor in a claim is better than settling none.  True, resolving future indemnity cost is slaying one of the evils of a work comp claim.  It can be done fairly easily through negotiation of the parties, with little costs involved other than legal expense for going to court and signing the paperwork.
 
Lifetime Claim Challenges
 
Medicare Set-Asides
 
This leaves a question begging to be answered: Why is it now common practice to give up on reviewing the future medical costs, especially since many studies show that the medical can cost up to as much as 60% of the expense over the lifetime of a claim? One answer could be getting the necessary information needed for a good MSA is labor intensive.  You need a great vendor that specializes in MSA work.  You need a lot of medical information to submit to get the MSA negotiations rolling.  You need to wait for months and months to hear back from CMS, and when they do answer they send you a billing statement with years and years of medical services they think they covered in error.  In addition, getting the medical reports that coincide with those dates of service can be nearly impossible. You will be lucky to get a procedure code and an amount billed.
 
So, in order to avoid spinning the wheels, these cases get ignored.  Bills will come in, and will get paid that probably have nothing to do with the actual injury or lingering side effects from countless years of surgical procedures.  Most often the biggest expense in this scenario is prescription cost.  Many carriers pay Rx bills with little more than the bat of an eye, and the click of a mouse. This is a significant error, but it happens every day.  This large medical leakage is the culprit of understaffing, and a lackluster attitude.
 
 
Failed Vocational Rehab & Lack of New Employment
 
A severe injury will lead to permanent restrictions, and if you attempt vocational rehab and job placement with no avail, you have the choice of paying a claim for life or attempting to settle his/her case in order to end your involvement.  Indemnity expense will lead the charge at the start of negotiations.  This is especially true if an injured worker is treating sparingly, meaning they are going to the actual doctor office once every 4-6 months.  There is a likelihood that the doctor is treating with prescription medication month after month after month. This is where carriers get in to trouble because the cost of certain medications can be jaw dropping. Take the monthly expense and make it a yearly cost, then multiply that by 20-30 years for life expectancy and you have a number that would catch the attention of every management personnel at even the biggest carrier out there.
 
 
 
Lifetime Claim Solutions
 
A fantastic IME, or a few of them with physicians that specialize in medication and possibly addiction, can stop the medical leakage in no time.  Just because you have accepted a claim for “life” doesn’t mean that you have to give up on it.  Claims people have a lot of weapons in their arsenal of defense, including medication reviews, surveillance to confirm a person is not doing anything outside of their medical restrictions, employment searches to see if they are indeed working somewhere under the table despite receiving work comp benefits, and so on.
 
Additional Solution options:
 
1.    Use an MSA vendor to help you streamline the process.  Use their expertise to your advantage.  Pick groups of files, and bring them in and let them do the legwork.  This is why they are out there, so use them.  Their expense will be nothing when compared to the expense of a lifetime claim that is not being closely monitored.
 
2.     Utilize a Structured Settlement Organization to move claims toward settlement.Structured settlements can help bridge differences during a negotiation by moving the focus from a lump-sum dollar amount today to meeting the financial needs and aspirations of the injured person tomorrow.  Dedicate staff toward settlement, set a goal, and give a handsome reward for those that are successful.  If you have 40 adjusters on staff, and each took 10 claims that is 400 claims that could be moving forward, instead of sitting still.
 
3.    Utilize a Pharmacy Benefit Manager (PBM).  Not only will this reduce medical cost by getting into their medical networks that have reduced Rx costs, but they will have physicians or pharmacists on staff that can review medical dosage, type, and duration and compare it back to the injury to see if it really needs to be dispensed in the first place.
 
4.    Attack those claims that have sat on the shelf and have 10” of dust on them.  Chances are these are the claims that are killing your medical reserves.  These claimants have gotten comfortable, so it’s time to see what they are up to.  It’s time for some surveillance, background checks, pharmacy checks, and so on.  You never know what you are going to find.
 
5.    Get an updated IME.  This will go hand in hand with the adjusters working on their 10 claims.  IME vendors have a marketer or account rep that can come to your office, so let them dig through the file to find the medical and copy the file.  This frees up time for your adjuster to work on the actual file itself instead of standing at the copy machine for 4 hours copying medical records.
 
Lifetime claims are not going to be solved overnight.  It is going to take months, even years to get some of these claims settled correctly, and some may never settle.  But you have to be proactive. The definition of a lifetime claim is not just one that sits on a shelf, ignored for years because you have more important things to take care of.  If you have done all that you can, and the claim just cannot settle, then that truly is a lifetime claim.  . 
 
 
Author Rebecca Shafer, JD, President of Amaxx Risk Solutions, Inc. is a national expert in the field of workers compensation. She is a writer, speaker, and publisher. Her expertise is working with employers to reduce workers compensation costs, and her clients include airlines, healthcare, printing/publishing, pharmaceuticals, retail, hospitality, and manufacturing. She is the author of the #1 selling book on cost containment, Workers Compensation Management Program: Reduce Costs 20% to 50%. Contact:RShafer@ReduceYourWorkersComp.com
 
Editor Michael B. Stack, CPA, Director of Operations, Amaxx Risk Solutions, Inc. is an expert in employer communication systems and part of the Amaxx team helping companies reduce their workers compensation costs by 20% to 50%. He is a writer, speaker, and website publisher. www.reduceyourworkerscomp.com. Contact: mstack@reduceyourworkerscomp.com
 
©2013 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law.  

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

Structured Settlements Can Resolve Legacy Claims Burden

Legacy Claims: 10% of Medical Costs For Services 20+ Years in Future

 

A January report from the National Council on Compensation Insurance, Inc. (NCCI) states that “it is likely that more than 10% of the cost of medical benefits for the workplace injuries that occur this year will be for services provided more than two decades into the future”.  The 10% number was based on the analysis of workers’ compensation claim payments covering the time period of January 1, 2009 to April 1, 2011 of claims with a minimum age of 20 years old, but not exceeding 30 years old. The data was derived from the 35 jurisdictions where NCCI provides ratemaking services and from 7 additional states where the NCCI provides statistical information to independent state rating organization.

 

While claims professionals refer to work comp claims that have been around for years as “old dogs”, the NCCI and the management level of the workers’ compensation insurers refer to these older files as legacy claims. The age a workers’ compensation claim reaches legacy status will vary by insurers with some insurers considering any work comp claim over three years old a legacy claim, while others refer to the claims as legacy claims when they reach five years old. Probably the best approach is to consider any claim where the claimant has reached maximum medical improvement, and the claimant continues to have indemnity payments or medical maintenance cost to be a legacy claim.

 

 

Legacy Claims Major Financial Burden

 

The most common type of legacy claim over 20 years old are those involving

 

  • injury / disease of the musculoskeletal system (43% of the female employee legacy claims, 32% of the male employee legacy claims);
  • traumatic complications (18% of the female employee legacy claims, 15% of the male employee legacy claims);
  • diseases not musculoskeletal or nervous system (7% of the female employee legacy claims, 11% of the male employee legacy claims);
  • disease of the nervous system (6% of the female employee legacy claims, 11% of the male employee legacy claims).

 

In certain cases, the decision to “opt” to keep the medical component of the workers compensation claim open as opposed to resolve it as part of the settlement can be very costly.

 

Duke T. Wolpert, Director of Marketing at Ringler Associates, offered some insights.

 

“At times, the risks associated with increased claim severity are unknown when a decision is made to settle the indemnity side of the workers compensation claim and leave the medical component of the file open. Other times, optimism plays a role when making this decision. Therefore, it is very important to proactively manage this claims population and re-evaluate settlement options (in jurisdictions that allow for the closing of medicals) as a mechanism to address claims that are driving the loss dollars.”

 

“Historical data suggests that the Pareto Principle (80-20 rule) applies to workers compensation claims. Thus, one’s ability to identify, manage and consider structured settlement alternatives is critical.”

 

Conclusion

 

By preventing claims from ever reaching the legacy stage, the claims professional will not be issuing checks on claims 20 years later. Ultimately, the 10% of workers’ compensation cost spent on claims 20 years old or older is eliminated.

 

 

Author Rebecca Shafer, JD, President of Amaxx Risk Solutions, Inc. is a national expert in the field of workers compensation. She is a writer, speaker, and publisher. Her expertise is working with employers to reduce workers compensation costs, and her clients include airlines, healthcare, printing/publishing, pharmaceuticals, retail, hospitality, and manufacturing. She is the author of the #1 selling book on cost containment, Workers Compensation Management Program: Reduce Costs 20% to 50%. Contact:RShafer@ReduceYourWorkersComp.com.

 

Author Michael B. Stack, CPA, Director of Operations, Amaxx Risk Solutions, Inc. is an expert in employer communication systems and part of the Amaxx team helping companies reduce their workers compensation costs by 20% to 50%. He is a writer, speaker, and website publisher. www.reduceyourworkerscomp.com. Contact: mstack@reduceyourworkerscomp.com.

 

©2013 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law.

 


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

Structured Settlements Provide Significant Tax Benefits And Financial Security

Financial Security Served Through Structured Settlement

 

The resolution of large or catastrophic workers’ compensation claims through a structured settlement is financially beneficial to the injured employee. However, most severely injured employees develop thoughts of what they can do with a large lump sum of money without realistically analyzing what their future or their families’ life-time financial situation will be. With proper guidance from either their attorney or from the work comp adjuster, the injured employee will stop to consider the long-term ramifications of their injury. Their financial security is normally best served through a structured settlement.

 

Internal Revenue Code defines structured settlements as periodic payments to settle an injury claim or a work related illness claim. Periodic payments are normally monthly but can be quarterly, annually or other specific points in time. To fund the periodic payments, the self-insured employer or the workers’ compensation insurer purchases an annuity from a life insurance company. (The life insurance company should be financially strong, with an A or higher rating from AM Best or similar service). The periodic payments can be for a set period of time (for example 20 years), for a life time, or for both the injured employee’s life time and the spouse’s life time.

 

 

Structured Settlements Are Not Taxed

 

The Internal Revenue Service (IRS) tax codes create a significant financial benefit to the injured employee through how structured settlements are not taxed. Congress passed the Periodic Payment Settlement Tax Act of 1982 (also known as Public Law 97-473) to provide severely injured liability claimants with tax relief. In 1986 codified the structured settlement rules in sections 104(a)(2) and 130 of the Internal Revenue Code of 1986. Congress would later expand the law to cover workers’ compensation injuries as a part of the Taxpayer Relief Act of 1997.

 

With a structured settlement the injured employee agrees with the self-insured employer (or work comp insurer) to release the employer of any further responsibility for the medical cost or indemnification obligation in exchange for the stream of periodic payments. The self-insured employer or insurer normally transfers the obligation to pay the employee to a life insurance company through the purchase of an annuity that meets the agreed to periodic payment schedule.

 

Once the injured employee and the self-insured employer (or the workers’ compensation insurer) have agreed to settle the work comp claim in exchange for periodic payments, the full amount of the periodic payments are tax-free income to the employee. If the injured employee opts for a lump-sum settlement, the lump-sum is not taxed; but all future earnings (both interest and dividends) on the lump-sum are taxable to the employee. Hence, even if the employee is a skilled money manager (most injured employees are not), there is a large future income tax savings benefit to the periodic payments of a structured settlement.

 

The IRS is not totally benevolent with structured settlements. The IRS codes state that in exchange for tax free periodic payments, the injured employee agrees that he/she does not have the authority to alter the periodic payments. The injured employee cannot increase or decrease the periodic payments, the employee cannot change the agreed to time frame of the periodic payments, and the injured employee cannot delay or defer the periodic payments to a later date.

 

 

Structured Settlement Options Should Be Explored

 

The amount of income tax savings depends on several factors including the amount of the periodic payments versus the amount of a lump-sum settlement, the employee’s other sources of income, the income tax rate, and future changes in the income tax rates. For an estimate of the income tax savings of the structured settlement, the injured employee should consult with their income tax professional.

 

 

Overall, a structured settlement is hard to beat for a tax-free source of income.  Any employee contemplating a workers’ compensation settlement should consider the use of a structured settlement. Most structured settlement firms provide structured settlement services to their clients at absolutely no cost to their clients.  For more information on structured settlements, please contact us.

 

Author Rebecca Shafer, JD, President of Amaxx Risk Solutions, Inc. is a national expert in the field of workers compensation. She is a writer, speaker, and publisher. Her expertise is working with employers to reduce workers compensation costs, and her clients include airlines, healthcare, printing/publishing, pharmaceuticals, retail, hospitality, and manufacturing. She is the author of the #1 selling book on cost containment, Workers Compensation Management Program: Reduce Costs 20% to 50%. Contact:RShafer@ReduceYourWorkersComp.com.

 

Editor Michael B. Stack, CPA, Director of Operations, Amaxx Risk Solutions, Inc. is an expert in employer communication systems and part of the Amaxx team helping companies reduce their workers compensation costs by 20% to 50%. He is a writer, speaker, and website publisher. www.reduceyourworkerscomp.com. Contact: mstack@reduceyourworkerscomp.com.

 

©2013 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law.

 


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

What to Look For in a Structured Settlement Company

 

The use of structured settlements in large and catastrophic workers’ compensation claims is well recognized as a way to reduce the overall settlement cost while at the same time providing the injured employee with a fair claim settlement.  However, a factor often overlooked in structured settlements is the identification and selection of the best structured settlement company.

 

There are several characteristics and qualities that should be considered in the selection of the structured settlement company.  They are:

 

  1. Experience.

You want a structured settlement company that has a track record.  A structured settlement company that has been around for decades has more resources to draw from then a structured settlement company that has been in business for a few months.  The more structured settlements the company has completed in the past, the greater likelihood that they know how to deal with every possible scenario that could interrupt or prevent a structured settlement from occurring.

 

 

  1. Ability to Design Settlements.

The structured settlement company must have the ability to taken into consideration the needs of everyone including the injured employee and employee’s family, the attorney for the employee, the employer and the employer’s workers’ compensation insurer.  The structured settlement has to be designed to be flexible to address the needs of the employee while maintaining control of the settlement cost for the insurer.

 

The structured settlement company consultant must have an in-depth knowledge of sophisticated damage analysis and life care plans, along with the different types of trusts that can be included in a structured settlement.  By understanding the injured employee’s future financial needs and future medical care, the structured settlement consultant can design a creative solution that benefits all parties involved in the workers’ compensation claim.

 

 

  1. Resources.

A structured settlement is basically an annuity (or annuities) purchased from a life insurance company.  It is therefore essential for the structured settlement company to have several top rated life insurance companies available to provide the annuity/annuities.  By having several highly rated insurance companies available, the consultant can shop the settlement package with the different insurers to obtain the lowest overall cost for the structured settlement.

 

 

  1. Reputation.

There are structured settlement companies that work only with the plaintiff attorneys and there are structured settlement companies that specialize in working only with the defense attorneys.  These companies are well known to both the sides of the legal aisle, and are often mistrusted by the other side.  A structured settlement company that works with both plaintiff attorneys and defense attorneys must maintain a reputation of being unbiased and fair in all their dealings.  By selecting a structured settlement company that has the trust and extensive experience working with both sides of the legal aisle, the mistrust that hampers and prevents some structured settlements from occurring is removed.

 

 

  1. Geographical spread.

The structured settlement company should be somewhat local.  If the structured settlement company has only one office or even several offices in another part of the country, it is difficult for the structured settlement consultant to meet with the various parties involved in the injury claim. An example – if the structured settlement company is located in Florida and the injured party is in California, the structured settlement company will be less effective.  The structured settlement company that has a complete geographical spread and can provide a local consultant whether the injured employee is in Maine, Hawaii or somewhere in between will be able to provide the best service.

 

The proper selection of the structured settlement company can have a significant impact on the cost of the structured settlement.  For assistance in identifying and locating the best possible structured settlement company, please contact us.

 

 

Author Rebecca Shafer, JD, President of Amaxx Risk Solutions, Inc. is a national expert in the field of workers compensation. She is a writer, speaker, and publisher. Her expertise is working with employers to reduce workers compensation costs, and her clients include airlines, healthcare, printing/publishing, pharmaceuticals, retail, hospitality, and manufacturing. She is the author of the #1 selling book on cost containment, Workers Compensation Management Program: Reduce Costs 20% to 50%. Contact:RShafer@ReduceYourWorkersComp.com.

 

Author Michael B. Stack, CPA, Director of Operations, Amaxx Risk Solutions, Inc. is an expert in employer communication systems and part of the Amaxx team helping companies reduce their workers compensation costs by 20% to 50%. He is a writer, speaker, and website publisher. www.reduceyourworkerscomp.com. Contact: mstack@reduceyourworkerscomp.com.

 

©2013 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law.

 


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

How to Plan, Prepare, and Negotiate Claim Settlement

 

Claim Resolution Should Start Immediately

 

Self-insured employers who utilize their own in-house adjusters often ask questions about how to arrive at a fair and equitable settlement of the workers’ compensation claims, especially claims where the employee is represented by an attorney.  The reasonable resolution of a workers’ compensation claims does not start when the employee’s attorney sends a demand letter toward the end of the claim, the proper resolution of the claim starts immediately upon notice the employee has been injured in an accident.

 

The first thing an employer can do to move a workers’ compensation claim toward a fair settlement is to provide immediate medical care following an injury.  In the states where the employer selects the medical provider, the employee should be directed to the nearby industrial clinic previously chosen (with the name/address of the industrial clinic posted on the employee’s bulletin board).  In the states where the employer cannot mandate the medical provider, a short listed of recommended doctors should be posted on the bulletin board.

 

The first phone call the employer should make following an injury is to the medical provider’s office notifying them that the injury just occurred and advising them the employee is on the way to their office.  This will streamline the admittance process for the injured employee and will reduce the amount of time between injury and medical treatment.  When the injury to the employee does not appear to be severe, the initial phone call to the medical provider will also allow you to remind the medical provider of your company’s light duty program for injured employees.

 

The second phone call immediately following the first phone call should be to the claims office/adjuster advising of the new workers’ compensation claim.  The protocol for your in-house adjusters should be to contact their fellow employee the same day to discuss their injury and the claim handling process.  By taking control of the workers’ compensation claim the first day, you start laying the ground work for the claim settlement.

 

 

On-Going Contact is Essential

 

During the course of the employee’s recovery is essential to have on-going contact with the injured employee by the employee’s supervisor or department manager or workers’ compensation coordinator or adjuster (whoever is delegated the responsibility).  By simply asking the employee to keep you abreast after each doctor’s visit of what the doctor had to say, will keep the lines of communication open and assist in getting the employee back to work on modified duty sooner.  It will also make settling the claim easier as the employee sees the employer less as ‘the other side’ and more as a partner in the recovery process.

 

In states where the employee selects his own medical provider, often the employee’s attorney will send the employee to a doctor the attorney knows will keep the employee off work for as long as the plaintiff attorney wants the employee to be off work. [In these cases the employee’s release from medical care will coincidentally occur when the employee begins to complain to the plaintiff attorney that they are having financial issues, as they have not adjusted their life style to live on the workers’ compensation disability payments].  When the medical provider is non-cooperative about returning the employee to modified duty work, the in-house adjuster can arrange for a peer review of the medical treatment being provided or arrange for an independent medical examination to show the employee is capable of modified duty work.

 

If the injury is severe, a nurse case manager should be assigned to the claim to manage and direct the medical care as much as possible.  By facilitating the medical care through a nurse case manager, the employee will make a quicker and better recovery with a lower overall impairment rating.  This will impact the settlement negotiations favorably.

 

 

Seek Settlement When Reach Maximum Medical Improvement

 

As soon as the medical provider indicates the employee has reached maximum medical improvement, an effort should be made to immediately move forward with settling any compensation owed for a permanent partial impairment. A few states still use the impairment rating combined with the employee’s disability compensation rate to establish the claim’s settlement value.  Most states however have gone to what amounts to a negotiated settlement of the workers’ compensation claim.

 

All the steps above are designed to manage and control the claim resulting in a lower initial settlement demand by the employee or the employee’s attorney.

 

Once the employee has reached maximum medical improvement and has been assigned an impairment rating, the in-house adjuster should thoroughly review the file and the medical facts of the injury to establish a settlement range for the claim. Once the settlement range has been determined, the adjuster should develop a negotiations strategy on how the adjuster plans to reach a value within the settlement range.

 

If any part of the settlement range exceeds the adjuster’s settlement authority, the adjuster should contact the person who can grant additional settlement authority with a detailed explanation as to why settlement authority over the adjuster’s settlement authority level is needed.

 

 

Employee Attorney Should Make Initial Offer

 

The in-house adjuster should not make the initial settlement offer until after the employee’s attorney has made their initial settlement demand.  If the adjuster makes the initial offer, the employee’s attorney will negotiate up from that point.  Better results are normally obtained by letting the employee’s attorney make the initial demand and negotiating down from the attorney’s settlement demand.

 

Once the adjuster has the demand from the employee’s attorney, the adjuster should review the attorney’s demand to determine how reasonable, or unreasonable, it is.  The adjuster should evaluate the key points the attorney uses to support his/her demand and determine if there is any justifiable reason to reevaluate the adjuster’s settlement range.

 

The adjuster’s initial offer to settle the claim should be as far below the mid-point of the adjuster’s settlement range as the employee’s attorney initial demand is above the mid-point of the adjuster’s settlement range.  The adjuster’s initial offer should include some of the key points on which the adjuster based the settlement range.

 

When the employee’s attorney makes a jester toward settling the claim by lowering their demand, the adjuster can mirror the attorney’s step toward claim settlement by raising the settlement offer a similar amount.  By mirroring the attorney’s settlement demand reduction with an increase in the settlement offer of the same size, the adjuster signals to the plaintiff attorney what the settlement amount will be without committing to anything.

 

 

Be Aware of Attorney Negotiating Tactics

 

A favor ploy of plaintiff attorney’s is to stop negotiating and state they have reached their bottom line.  This is an effort on the attorney’s part to get the adjuster to bid against him/herself and to raise the settlement offer multiple times without the attorney lowering the settlement demand any.  This pushes the adjuster to the high end of the settlement range if the adjuster falls for the ploy.  It also creates a situation where the adjuster will have to overpay to settle the claim, or enter into an extended defense of the claim.  The adjuster’s best response to the attorney stating they have reached their bottom line, is a simple, “yeah, me too.  I was hoping to settle the claim, but I have reached my settlement authority.  If your client decides to lower their demand any, please let me know and I will pass it along to the higher ups”.

 

A tactic used by some attorneys to try to force a higher than justifiable settlement is to claim the employee has had a relapse.  The attorney tells the employee to go back to the doctor and emphasis how much pain they are having, the difficulties they are incurring due to their impairment, and to start treatment with the doctor in an effort to get a higher impairment rating.  This tactic should be countered with an independent medical evaluation to verify or disprove the worsening of condition claim.

 

By preparing for settlement negotiations from the start of the claim, and by planning and managing the settlement negotiations, the in-house adjuster can obtain a fair and reasonable settlement.  While it takes a level of high quality claims handling to obtain an equitable settlement of the workers’ compensation claim, it is well worth the effort to obtain a proper negotiated settlement.

 

 

Author Rebecca Shafer, JD, President of Amaxx Risk Solutions, Inc. is a national expert in the field of workers compensation. She is a writer, speaker, and publisher. Her expertise is working with employers to reduce workers compensation costs, and her clients include airlines, healthcare, printing/publishing, pharmaceuticals, retail, hospitality, and manufacturing. She is the author of the #1 selling book on cost containment, Workers Compensation Management Program: Reduce Costs 20% to 50%. Contact:RShafer@ReduceYourWorkersComp.com.

 

Editor Michael B. Stack, CPA, Director of Operations, Amaxx Risk Solutions, Inc. is an expert in employer communication systems and part of the Amaxx team helping companies reduce their workers compensation costs by 20% to 50%. He is a writer, speaker, and website publisher. www.reduceyourworkerscomp.com. Contact: mstack@reduceyourworkerscomp.com.

 

©2012 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law.

 


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

The Value of Using Structured Settlements When Addressing Medicare Set Asides

 

Medicare Secondary Payer Statute Protects Medicare’s Interests

 

The Medicare Secondary Payer statute (MSP), 42 CFR 411, requires that primary payers (carriers, self-insured entities) protect Medicare’s future interest when settling the medical component of workers’ compensation claims. Medicare’s preferred method to protect their interests is to include a Medicare Set-Aside Allocation (MSA) as part of the settlement. The MSA serves as the mechanism to fund future Medicare allowable expenses for work related injuries that were included as part of the settlement.

 

The MSP statute clearly delineates that Medicare is a “secondary payer” in situations where primary payers exist. If the primary payer (carrier, self-insured entity) settles future medicals and fails to protect Medicare’s interest, Medicare may deny coverage.

 

Medicare Set Aside Ensures Compliance

 

To comply with the MSP requirements, insurers create a Medicare Set Aside (MSA) agreement (also referred to as a MSA) which estimates the future Medicare allowable expenses relative to the work-related injuries. In certain circumstances, the MSA is submitted to Medicare for their review and approval. If Medicare concludes the MSA amount to be adequate, the insurer proceeds with the settlement which includes the MSA amount. The MSA funds are paid as part of the settlement to the injured employee.

 

Regardless of the age of the injured party, future medical costs are often times very significant.  It is not uncommon that MSA costs adversely inhibit the primary payers ability to move forward with settlement. While many insurers and self-insured entities pay MSA funds by way of a lump sum, it is often much more advantageous for all parties involved to address the MSA with the use of a structured settlement.

 

Structured Settlement Offers Many Advantages

 

A structured settlement is an annuity purchased from a life insurer and established to make annual payments of the MSA amount over the life-time of the employee.

 

The structured settlement of the MSA provides several benefits including:

 

  • Establishes the distribution of periodic payments for the MSA funds and assists in avoiding both a premature exhaustion of funds and/or the inappropriate use of the funds

 

  • Offers cost-containment benefits as the cost of the annuity is less than paying funds out as a lump sum

 

  • Assists in facilitating settlement in situations where money is freed up by purchasing an annuity for the MSA and can be utilized for the indemnity component of the settlement if required

 

 

A Medicare Set Aside Structured Settlement Example:

 

To see how a structured settlement saves money, consider the following hypothetical example.  The injured employee is a former motel maid Jane Doe, age 45, who injured her back lifting a heavy bag of trash.  She is morbidly obese, has diabetes, hypertension and gout.  She has had 3 unsuccessful back surgeries and is expected to be permanently and totally disabled.  Due to her on-going pain management treatment, medical appointments and narcotics, it is estimated that her medical care over her 30 year rated life expectancy will be $10,000 per year or $300,000 in total. There are two ways to pay for the future medical care.  The first way is to write Ms. Doe a check for $300,000.

 

The second way to pay for the MSA is through a structured settlement.  We first obtain a rated age (based on comorbidity factors) and evaluate the structured settlement quotes. After parties agree to terms on the settlement (including the structured MSA) and CMS review is completed (if applicable), settlement funds are disbursed.

 

By structuring the MSA in this scenario, the total cost of the annuity was $225,000 to the carrier or self-insured entity and the injured party reaped the benefits of the annuity payout of $300,000 (includes the CMS required two-years of seed money and periodic payments that will be paid over the life of the annuity).

 

The potential hard-dollar savings in the above hypothetical example is $75,000.  As this is an example, the savings could be actually greater/less all depending on a number of factors – size of MSA, comorbidity factors for rated age purpose and  rates of return on the annuity (tax free interest earnings on the annuity).

 

To learn more about utilizing structured settlements when addressing MSAs, please contact us.

 

 

Author Rebecca Shafer, JD, President of Amaxx Risk Solutions, Inc. is a national expert in the field of workers compensation. She is a writer, speaker, and publisher. Her expertise is working with employers to reduce workers compensation costs, and her clients include airlines, healthcare, printing/publishing, pharmaceuticals, retail, hospitality, and manufacturing. She is the author of the #1 selling book on cost containment, Workers Compensation Management Program: Reduce Costs 20% to 50%. Contact:RShafer@ReduceYourWorkersComp.com.

 

Editor Michael B. Stack, CPA, Director of Operations, Amaxx Risk Solutions, Inc. is an expert in employer communication systems and part of the Amaxx team helping companies reduce their workers compensation costs by 20% to 50%. He is a writer, speaker, and website publisher. www.reduceyourworkerscomp.com. Contact: mstack@reduceyourworkerscomp.com.

 

©2012 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law.

 


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

What the SMART Act Really Does

 

There has been a lot of discussion recently in the insurance world about the SMART Act (Saving Medicare and Repaying Taxpayers Act) passed into law by Congress in December and signed by President Obama on January 10, 2013. 
 
Designed to Address Medicare Secondary Payer Statutes
 
The SMART Act came about due to the conflicts that occur between state workers’ compensation insurance laws and the federal laws overseen by the Centers for Medicare and Medicaid Services (CMS).  The largest area of conflict was the settlement of workers’ compensation claims that left Medicare paying for future medical treatment of injured employees. 
 
The main initiative to address this problem was the Medicare Secondary Payer (MSP) statutes.  The MSP Act requires insurance companies, including workers’ compensation insurers’ to be the primary source of payment for all injuries to people.  When a workers’ compensation insurer settles a workers’ compensation claim, MSP statutes require the insurer to either prepay the future cost of medical care, or to keep the medical portion of the claim open until the injured employee no longer needs medical care.  If the insurer failed to protect Medicare from payment of work-related, injury medical bills, Medicare can hold various parties responsible for reimbursement of the Medicare paid expense, including the insurer, employer, employee, attorneys who had represented one of these parties, and even the medical provider.
 
While the intent of MSP was proper, the MSP statutes created a whole new set of problems for insurers, employers and injured employees.  Different sections of the SMART Act are designed to eliminate some of those problems (but it is too early to determine what new problems will be created by the SMART Act).
 
 
Primary Changes in Act
 
Most risk managers and workers’ compensation managers know the SMART Act is about changes in Medicare Secondary Payer (MSP) statutes, but most don’t know the details of the changes in the law.  The primary changes brought about by the SMART Act include:
 
·       The SMART Act provides Medicare 9 months to create or to alter the operational guidelines to enforce the changes brought about by the SMART Act
 
·       A minor change is the alteration of the low dollar threshold exemption for MSP compliance. For example – the injured employee is 64 years old at the time of claim settlement (within 30 months of Medicare eligibility). Five years later the claimant incurs a single $250 medical bill.  Medicare will not pursue recovery of the low dollar claim.  The current low dollar threshold is $300.  The change in the law will allow annual adjustments in the low dollar threshold.
 
·       A major change is the mandatory $1,000 per day penalty for non-compliance with MSP is being changed to “up to $1,000 a day”.  The change was made to eliminate the fines being given to insurers, employers, employees, attorneys, etc. who had made a good faith effort to comply with the MSP law. The SMART Act gives Medicare 60 days to solicit suggestions on how the penalty provisions can be enforced while protecting those who have tried to comply with the law from being fined.
 
·       A change in the law that will probably have no impact on workers’ compensation insurers and employers is the change in the law that permits, but does not require, the use of social security numbers.  (The alternative is a Health Care Identification Number assigned to an individual).  Medicare currently uses social security numbers to track their payment history on each person.  As employers are required to use social security numbers for federal taxes, the continuation of using social security numbers in workers’ compensation claims is not expected to change.
 
·       A change for the better is the new 3 year statute of limitations on all legal complaints brought by Medicare and all actions seeking penalties. (Previously there was no statute of limitations and an insurer’s or employer’s exposure continued forever).  The statute of limitations is 3 years from the date Medicare is notified of a judgment, settlement, award or any other payment subject to their reporting guidelines. If an insurer fails to report to Medicare a judgment, settlement, award or any other payment subject to the Medicare reporting guidelines, the 3 year statute of limitations does not start to run until they are notified.
 
 
Hiccups Expected Along the Way
 
If it was only this simple.   As Medicare is a government agency which has been given the responsibility of modifying their own internal procedures to comply with the SMART Act, it is expected there will be hiccups along the way.  Also, prior changes in the MSP statutes have resulted in unintended consequences.  That could be the case with the SMART Act.  Employers, insurers, third party administrators and other parties responsible for reporting information to Medicare should continue to practice their own internal established procedures to insure compliance with MSP requirements.
 
 
Author Rebecca Shafer, JD, President of Amaxx Risk Solutions, Inc. is a national expert in the field of workers compensation. She is a writer, speaker, and publisher. Her expertise is working with employers to reduce workers compensation costs, and her clients include airlines, healthcare, printing/publishing, pharmaceuticals, retail, hospitality, and manufacturing. She is the author of the #1 selling book on cost containment, Workers Compensation Management Program: Reduce Costs 20% to 50%. Contact:RShafer@ReduceYourWorkersComp.com
 
Editor Michael B. Stack, CPA, Director of Operations, Amaxx Risk Solutions, Inc. is an expert in employer communication systems and part of the Amaxx team helping companies reduce their workers compensation costs by 20% to 50%. He is a writer, speaker, and website publisher. www.reduceyourworkerscomp.com. Contact: mstack@reduceyourworkerscomp.com
 
©2012 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law.  

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

The Best Tidbits Of News From The Workers Comp Community

 

 
The United States House of Representatives today passed the Saving Medicare and Repaying Taxpayers (SMART) Act as part of a broader legislative effort. The SMART Bill was attached to House Bill 1845 Medicare IVIG Access Bill which provides for…Read More
 
 
 
Create a framework for your organization’s risk management program that aligns with its goals, sets roles and responsibilities for the team and provides communication strategies needed to report to senior management and other stakeholders.  Read more…
 
 
 
Broadspire, a Crawford Company (NYSE: CRDA; CRDB) and leading third-party administrator of workers compensation claims, liability claims and medical management services, announced today that it has been awarded continued accreditation for Case Management, Workers' Compensation Utilization Management, Health Utilization Management, and Independent Review Organization: Internal Review from URAC, a Washington, DC-based health care accrediting organization that establishes quality standards for the health care industry. Read more…
 
 
 
From now thru Dec 2012, if you buy either the 2012 RIMS Benchmark Survey Book or the 2012 Workers Compensation Management Program Book, we’ll send you a second copy at no charge.
The RIMS Benchmark Survey Book and our Workers Comp Cost Reduction Book are the most popular books that we offer, and we're trying to set a sales record in December.
Now thru December 31, 2012 order one copy of either of two books below and receive a second copy of that book for FREE.  Read more…
 
 
 
Tallahassee, FL (WorkersCompensation.com) – The Florida Legislature passed and Governor Rick Scott has signed into law CS/HB 941, which amends sections 440.02(9) and 440.05, Florida Statutes. Effective July 1, 2013, the law changes to include Limited Liability Company (LLC) members as employees.  Read more…
 
 
Author Michael B. Stack, CPA, Director of Operations, Amaxx Risk Solutions, Inc. is an expert in employer communication systems and part of the Amaxx team helping companies reduce their workers compensation costs by 20% to 50%. He is a writer, speaker, and website publisher.  www.reduceyourworkerscomp.com
 
 
©2012 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law.

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

Attorney Perspective on Lump Sum Settlements, You Know Outcome Before Papers Are Filed

 

WCRI Study Diligently Done, Missed the Point

 

Workers Compensation Research Institute (WCRI) has recently published a study of post-settlement lump sums and return to work. With all due respect to a diligent study, it must be said that WCRI was given the task of analyzing the engine of a vehicle by commenting on the paint job and the tires – which is no substitute for a look under the hood.

 

Attorneys, however, see and hear far more than they feel comfortable with discussing. Nothing they can’t discuss, of course, but the discussion would be too much “inside baseball”, and would reveal the insider’s view of “disability”.

 

 

Attorney’s Can Tell You Age & Attitude Have Significant Influence

 

WCRI looked at overall RTW patterns. An attorney quickly learns that age and attitude have far more to do with RTW than levels of disability. The group that receives lump sum settlements to close extended disability claims is actually composed of three groups.

 

 

3 Groups: Older Workers, Younger Workers with History, Motivated Workers

 

One is composed of older workers, near retirement, with concurrent degenerative medical conditions. A second is composed of younger workers who have already established a pattern of instability with employment situations and will, in all likelihood, continue that pattern. A third group is workers who truly want to work and have been sidelined more by comp procedures than disability.

 

Unfortunately, an outside researcher is unlikely to be able to sort the groups out, although a comp lawyer could indentify most as they walk into the office for the first time.

 

Statistics fail when they average performances of groups that are truly separate; the conclusion will be either too high or too low for the individual groups. Success will only come when the ability to recognize discrete groups is achieved.

 

 

Greed Rarely Major Factor

 

When the author worked on SIU matters, the question was always how to deal with “fraud” as though that was always synonymous with “greed”. Results in suppressing fraud soared when it was realized that pure greed was almost never the major factor. Instead, anti-social rage, whether or not it produced much money, was the principal motive, followed by short-sighted methods to deal with a plunge in family income coming in second. Neither could be described as “greed”.

 

Lawyers, employers and carriers needn’t have near-psychic levels of skills to predict results in lump-sum settlement situations. Practically speaking, there isn’t an infinite, or even a very large, range of possible outcomes. But the skill at recognizing them can only come from up close and personal interactions with workers. Lawyers can make a prediction quickly, but the employer already knew the outcome before the first papers were filed.

 

 

Employers to Share as Much Information as Possible

 

The lesson for employers is to share as much information with the carrier as soon as possible. The lesson for carriers is to pose the right questions to the right people. The right questions lead to the right claims solutions. There are few surprises.

 

 

 

Author: Attorney Theodore Ronca is a practicing lawyer from Aquebogue, NY. He is a frequent writer and speaker, and has represented employers in the areas of workers’ compensation, Social Security disability, employee disability plans and subrogation for over 30 years. Attorney Ronca can be reached at 631-722-2100. medsearch7@optonline.net

 

Editor Michael B. Stack, CPA, Director of Operations, Amaxx Risk Solutions, Inc. is an expert in employer communication systems and part of the Amaxx team helping companies reduce their workers compensation costs by 20% to 50%. He is a writer, speaker, and website publisher.  www.reduceyourworkerscomp.com.  Contact:  mstack@reduceyourworkerscomp.com.
WORKERS COMP MANAGEMENT MANUAL:  www.WCManual.com
MODIFIED DUTY CALCULATOR:  www.LowerWC.com/transitional-duty-cost-calculator.php

 

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

 

©2012 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact us at: Info@ReduceYourWorkersComp.com.

 

Do Lump Sum Settlements Aid or Detract from Employees Returning to Work

 

 
2,000 Injured Worked Studied for 4 years After Settlement
 
I recently read article from Risk & Insurance Online, where they state that the Boston-based Workers Compensation Research Institute looked at more than 2,000 workers injured in Michigan in 2004 who received lump sum settlements.  The researchers followed their employment experience for the next 4 years. The study found that:
 
  1. Three-quarters of the injured workers who received lump sum settlements did not change their employment status, “which means that many of those who were employed at the time of the lump sum stayed employed and those that were not employed remained unemployed”
 
  1. Of those who did change their employment status, nearly a third who were employed at the time of the settlement left work, and nearly a fifth of those who were not employed attained employment after the settlement.
 
  1. Average employment in the sample increased from 25% of workers at the time of the lump sum settlement to 32% of workers one year after a settlement. “The exception is older workers who experienced a decline in employment after a settlement.”
 
“This is an important study because we need to find out whether settlements discourage return to work for injured workers who want to return to work or assist them in closing this chapter of their life and moving on with their career” said Bogdan Savych, the author and a public policy analyst at the WCRI. [WCx]
 
 
Only small percentage of Employees Looking for an Early Retirement
 
The common consensus or stereotype among adjusters could be that workers trying to obtain a lump sum settlement are in it for the wrong reasons, looking for a way to fund an early retirement and remove themselves from the workforce forever.  Sure this could be true, but obviously this is for a small percentage of the injured workers looking for a lump sum settlement according to this study. 
 
There could be a ton of variables, including age of the worker, type of injury, severity of injury, post-injury medical and physical limitations that could hinder a gainful return to work in the occupation that the worker desires, overall economic reasons forcing a return to work, and so on.
 
Adjusters forget that a person’s life does not end after a settlement has been reached, rather it is just the end of the file for the adjuster.  Obviously younger workers could rarely sustain a prosperous life from the time of their settlement to their death, meaning that they would have to stretch those settlement monies over the course of their whole lifespan.  On the opposite side, and as the study shows, older workers nearing retirement would rarely return to full time gainful employment after a settlement, since they may not need to work anymore, but again this could vary on Pensions, 401ks, savings account amounts, and the like.  It is feasible to state that maybe older workers who wished to retire after a settlement still could not do so, based on their own personal economic needs. 
 
 
In General, People Return to Work After Receiving a Settlement
 
Looking at this from a general broad perspective, this study proves that people return to work after receiving a settlement for their comp injury.  The adjuster has incentive to attempt to resolve the case as soon as they can, because once the settlement is completed the case is off the books of the carrier, and the file is closed forever, if a full/final settlement is to be performed. Plus it ends the case for the injured worker and the employer, and everyone can move on with their life.
 
 
Not Considered in Study is Various Ways to Settle a Case
 
One thing this study did not look at which is important is the various ways to settle a case, including an indemnity-only settlement, which keeps medical open.  This is becoming more and more of a trend, just because it closes one of the expense doors, wage loss, and the adjuster can settle the medical exposure at a later date once a clamant slows down on treating and nears Maximum Medical Improvement.  Making this settlement more common is the involvement of Center for Medicaid and Medicare Services and the need for a Medicare Set Aside to resolve all aspects of a claim if a person’s injury is reportable to Center for Medicaid and Medicare Services because they are on Social Security.  If the worker is billing Medicare for their treatment in error, then there is a huge lien to address with Center for Medicaid and Medicare Services, and this can involve many headaches, and the many months of time that have to go by while the carrier negotiates with Medicare on what is their responsibility to pay, and what is the responsibility of Medicare.
 
Another option is a structured settlement, where an injured worker receives payment from a third party in excess of what a carrier pays to fund the structure, providing incentive to the injured worker to take this type of settlement because in the end they will net more monies than if they just took a check from the carrier to settle.  The downside for the worker is that they do not get all of the settlement money up front, but rather in monthly payments over a specific period of years, with interest attached.   [WCx]
 
 
Summary
 
Speaking generally, the study proves that a worker will indeed return to work after a settlement is obtained.  What the study fails to take into account is the several factors that go in to accepting a settlement, and then having to either return or not return to the workplace.  Making it more complicated is the varying types of settlements that are out there, and becoming more and more popular as conditions warrant.  I believe the most important thing to take away from this study is that when considering settlement; adjusters should not look at it as the worker looking for an early exit out of the workforce.  Instead look at it as a way of resolving the claim, so all parties can move forward. 
 
Sure, if adjusters are pessimistic and are viewing the settlement only as a way for the worker to obtain a lifelong vacation, this can hinder negotiation.  Instead adjusters should put themselves in the boots of their injured claimants. What would they do if they were faced with these options, and how can you make it be the most attractive as a way to end a claim?  Should it be lump sum, structured, indemnity-only, or anything else?  Is the claimant in need of lifelong medical care, or have they reached Maximum Medical Improvement and they are as good as they are ever going to be? And no matter what the answers are to these questions, what type of settlement would benefit all parties?  It is when we answer these questions, and place ourselves on the other side of the fence, that we can settle claims in a beneficial way to all parties, and move on to the next challenging claim that awaits us. 
 
 
 

Author Rebecca Shafer, JD, President of Amaxx Risk Solutions, Inc. is a national expert in the field of workers compensation. She is a writer, speaker, and publisher. Her expertise is working with employers to reduce workers compensation costs, and her clients include airlines, healthcare, printing/publishing, pharmaceuticals, retail, hospitality, and manufacturing. She is the author of the #1 selling book on cost containment, Workers Compensation Management Program: Reduce Costs 20% to 50%. Contact: RShafer@ReduceYourWorkersComp.com.

 

Editor Michael B. Stack, CPA, Director of Operations, Amaxx Risk Solutions, Inc. is an expert in employer communication systems and part of the Amaxx team helping companies reduce their workers compensation costs by 20% to 50%. He is a writer, speaker, and website publisher.  www.reduceyourworkerscomp.com Contact mstack@reduceyourworkerscomp.com

 


WORKERS COMP MANAGEMENT MANUAL:  www.WCManual.com

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MODIFIED DUTY CALCULATOR:  www.LowerWC.com/transitional-duty-cost-calculator.php

 

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

 

©2012 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact us at: Info@ReduceYourWorkersComp.com.

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