Take Back Control Of Medicare Conditional Payments

Resolving conditional payments remains a challenge for all stakeholders in workers’ compensation cases.  This is the result of complex rules and processes that have failed to keep up with the nature of litigation as parties seeking to resolve their cases.

 

 

What are Conditional Payments?

 

Under the Medicare Secondary Payer Act, “conditional payments” occur when Medicare “make(s) payment…with respect to an item or service if a primary plan…has not made or cannot reasonably be expected to make payment with respect to such item or service promptly….”  In other words, they arise in instances where a workers’ compensation insurance carrier either has denied primary liability, refuses to make payment based on a legal defense (treatment parameters, reasonableness/necessity, etc.), or Medicare mistakenly makes a payment.

 

 

Challenges of Resolving Conditional Payments

 

Unlike traditional liens for private medical insurance carriers, Medicare is unable to provide parties with the final amount in most instances prior to settlement.  The main barrier in resolving conditional payments lies in the slow rate at which health care providers make claims for reimbursement by Medicare.  A persistent delay in Medicare processing claims further slows the process.  The aging US population is also increasing the pressures on CMS for administering the program. 

 

 

Conditional Payment Resolution under the SMART Act

 

The passage of the SMART Act was the first legislative attempt to refine the conditional payment dispute and resolution process.  The effort to streamline this process was stymied due to an administrative delay by CMS to issue and implement final rules for conditional payment resolution, which is now effective under Rule 42 C.F.R. 411.39.  Under this process, parties are able to obtain a final conditional payment amount after maneuvering through some specific procedures. 

 

Only Medicare beneficiaries are able to take advantage of the current expedited process until implementation of a multi-factored authentication process.  This process will likely be completed before January 1, 2016.

 

 

Problems with the Resolution Process

 

Some argue the above process does not mirror the letter and spirit of the SMART Act.  While this may very well be the case, other problems arise given the nature of litigation.  The problems include:

 

  • Delays in providers submitting bills to Medicare for reimbursement;
  • Confusion between “Original” Medicare (Parts A and B) and Medicare Advantage Plans (Parts C and D);
  • Changes in review contractor functions and failure for practitioners to keep abreast of changes; and
  • Claimants that continue to receive ongoing medical care during settlement negotiations.

 

 

Conditional Payment Resolution Best Practices

 

When dealing with conditional payments, it is important to take back your claim—and monitor the issue on a continual basis.  In most instances, even the beneficiary’s attorney is unaware of the frequency their client is receiving medical care and treatment.  While Medicare is paying the claims, frequent medical care and treatment, along with unmonitored prescription drug use can be running up significant costs without anyone watching.  When Medicare catches up with these payments and asks for reimbursement it can cause major sticker shock.  It is in the employer’s best interest to get in front of this process, notify Medicare to stop making these payments, and regain the ability to manage the claim and control costs.

 

Working with a dedicated service provider is one of the best ways to resolve conditional payments in a timely manner.  Stakeholders can also take additional steps to improve their internal best practices and avoid delaying settlement:

 

  • Place the Coordination of Benefits & Recovery Contractor (COB&R) on notice with the correct injury related ICD-9/10 codes;
  • Carefully review the Conditional Payment Letter for incorrect/erroneous payments by Medicare;
  • Use online tools to identify conditional payments and monitor ongoing medical care and treatment of the claimant; and
  • Obtain current forms for conditional payment resolution.

 

 

Other Recent Conditional Payment Changes

 

As part of its effort to implement fully the SMART Act, CMS has recently released a training module related to conditional payment resolution.  This new process only involves “applicable plans” who want to appeal a conditional payment determination.  This new process includes the following steps:

 

1.Initial determination (Demand Letter);

2.Redetermination by the contractor issuing Demand Letter;

3.Reconsideration by a Qualified Independent Contractor;

4.Hearing before an Administrative Law Judge (ALJ);

5.Review by the Departmental Appeals Board’s Medicare Appeals Council; and

6.Judicial review in the United States District Court.

 

 

Conclusions

 

Resolving conditional payments in an effective manner requires patience, persistence and perseverance.  It also requires an understanding of CMS processes and the ability to work with all stakeholders in an effective manner.

 

 

Author Michael B. Stack, Principal, COMPClub, Amaxx Work Comp Solutions. He is an expert in employer communication systems and helps employers reduce their workers comp costs by 20% to 50%. He resides in the Boston area and works as a Qualified Loss Management Program provider working with high experience modification factor companies in the Massachusetts State Risk Pool.  He is co-author of the #1 selling book on cost containment, Your Ultimate Guide To Mastering Workers Comp Costs www.reduceyourworkerscomp.com, and Founder of the interactive Workers’ Comp Training platform COMPClub. Contact: mstack@reduceyourworkerscomp.com

 

©2015 Amaxx LLC. All rights reserved under International Copyright Law.

 

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WORKERS’ COMP TRAINING: https://workerscompclub.com

 

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

 

Demystifying the Medicare Maze

Navigating the CMS Workers’ Compensation Medicare Set-aside (WCMSA) review process has become easier with the advent of the WCMSA Reference Guide.  This guide was a consolidation of CMS policy memoranda since July 2001 and the Patel Memo.  Notwithstanding a more clear process, stakeholders still struggle with the handling of MSAs that do not meet the current review thresholds.

 

 

What Are the Current CMS Review Thresholds?

 

The WCMSA review and approval process is voluntary.  According to Section 8.1 of the WCMSA Reference Guide (version 2.3), CMS will only review a proposed Medicare Set-aside when the following workload review thresholds are met:

 

  • The claimant is a Medicare beneficiary and the total settlement amount is greater than $25,000.00; or

 

  • The claimant has a reasonable expectation of Medicare enrollment within 30 months of the settlement date and the anticipated total settlement amount for future medical expenses and disability or lost wages over the life or duration of the settlement agreement is expected to be greater than $250,000.00.

 

CMS cautions that “Claimants must still consider Medicare’s interests in all WC cases and ensure that Medicare pays secondary to WC in such cases.”

 

 

Developing Best Practices In Non-Threshold Cases

 

The beauty of having a case that meets CMS’ review thresholds is that parties can obtain “certainty” in their settlements.  This is not present if you have a case where the claimant is 60 years old, not on Medicare and a total settlement amount is $200,000.  Seeking a MSP compliance team that understands these issues can benefit your claim management team, clients and the bottom line of any workers’ compensation program.

 

  • Early Issue Identification. A valued service provider will assist clients understand the complexities of the WCMSA process and triggers that can be identified in their initial review of a claim.  This will allow a claim management team to get out ahead of a newly received file and set realistic expectations for future settlement.

 

  • Creativity is Key. The only good file is a closed file.  Do not let the Medicare Secondary Payer Act be a barrier to closing down a claim.  A valued Medicare service provider should be a partner with any claim management team.  In this relationship, the vendor will help the individual claim handlers come up with solutions to close-out troublesome files.  This is especially true in instances where the claimant is approaching Medicare entitlement, but a review threshold does not allow for use of the WCMSA review process.

 

  • Communicate; Communicate; Communicate. Increasing file loads are placing burdens on claim management teams and the people who handle insurance claims.  It is important to work with a partner that is able to communicate with their clients in an effective and efficient manner.  This is essential when it comes to Medicare Secondary Payer compliance.

 

  • Set Realistic Expectations. There is an ever-present tension between CMS policy and the Medicare Secondary Payer Act when it comes to the concept of “future medicals.”  When allocating for future medicals, CMS often ignores legal defenses such as causation and views every claim in a vacuum.  A valued partner who handles Medicare-compliance matters will be able to suggest strategies that resolve common problems such as treatment that never ceases or out-of-control prescription drug use.

 

 

Conclusions

 

Claim handlers and attorneys should evaluate their cases at the time it is opened for Medicare compliance issues.  This should include a firm understanding regarding the age of the claimant, the nature of their injuries, co-morbid conditions, anticipated future medicals and possible settlement outcomes.  In addition to these steps, seeking the right Medicare service provider can benefit any claim management team.

 

Author Michael B. Stack, Principal, COMPClub, Amaxx Work Comp Solutions. He is an expert in employer communication systems and helps employers reduce their workers comp costs by 20% to 50%. He resides in the Boston area and works as a Qualified Loss Management Program provider working with high experience modification factor companies in the Massachusetts State Risk Pool.  He is co-author of the #1 selling book on cost containment, Your Ultimate Guide To Mastering Workers Comp Costs www.reduceyourworkerscomp.com, and Founder of the interactive Workers’ Comp Training platform COMPClub. Contact: mstack@reduceyourworkerscomp.com.

 

©2015 Amaxx LLC. All rights reserved under International Copyright Law.

 

SALES TO PAY FOR ACCIDENTS CALCULATOR:  http://reduceyourworkerscomp.com/sales-to-pay-for-accidents-calculator/

MODIFIED DUTY CALCULATOR:   http://reduceyourworkerscomp.com/transitional-duty-cost-calculators/

WC GROUP:  http://www.linkedin.com/groups?homeNewMember=&gid=1922050/

SUBSCRIBE: Workers Comp Resource Center Newsletter

WORKERS’ COMP TRAINING: https://workerscompclub.com

 

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

 

 

I Love Seasoned Workers

To clarify, I am talking about workers over age 60.  I do not mean anything more or anything less.  These are the “seasoned” workers of today.  The workers who lost tons in their 401k, lost real estate value, and had a few other kicks in the shin along life’s journey.

 

These are the workers that also had grand dreams.  Dreams of retiring in their early 60s, if not sooner.  Dreams of a daily tee time, a warm climate, and comfortable living.  But alas, for some the dream did not work out.  For whatever the reason, the bills remain.  The 401k and pension portfolio was disappointing.  The 2nd youngest moved in to with their 2 kids.  So on and so on.

 

 

 

It Is Only One Facet To Study An Injury On Merits Alone

 

From a work comp standpoint, it is only one facet to study an injury on its’ merits alone.  Good claims professionals also study the socioeconomic and cultural factors driving the older worker to remain in the workforce.  These are not white-collar type soft jobs.  I am talking about the 62 year old welders, the 64 year old truck driver, and the 60 year old warehouse supervisor that still spends most of their day driving a forklift and yelling at people.

 

Those are the workers I love.  I would love a whole payroll of these workers.  They earned everything they have ever spent $1 on.  Earned through hard work, overtime, and long summer days working until dark.  Missing BBQs, tee times, and TV sitcoms.

 

So what happens when they finally get injured?  When that shoulder or back finally gives out after years of abuse?  Plenty of studies have been completed; you can google hundreds of these articles. However, below is what I have seen and reviewed over the years.  Some of it coincides with the many reports and some aspects do not.  Let’s face it—as we know every file is different, and every person is different.  To make a macro opinion is fantastic, but you cannot settle files based on macro-based broad-spectrum views.  To settle that one bad file, you have to break it down to the simple core of whatever is driving the claimant to continue to fight.

 

  1. These workers can efficiently get the job done. In a warehouse or manufacturing facility, these are the workers that you count on.  The workers that show up every day rain or shine.  These people put in the overtime that makes your business successful.  As seasoned veterans, they know the job inside and out.  They have seen it all, made it all, manufactured it all, and know their job inside and out.

 

  1. These workers are training your floor leaders of tomorrow. When a new hire comes on board, you want these workers training your new staff.  They know how to get the job done, and do it the right way.  Every now and then there are some that cut safety corners and teach some bad habits, and that is not OK.  However, they know how to get the job done.  As long as it is not something blatantly dangerous, let them teach.  It takes years to learn the real tricks of the trade.  To have a long term employee in your ranks that can mold the new generation is a genuine asset.

 

  1. When your veteran worker gets injured, it is going to be a bad one. This goes back to the point that these workers fight for every dollar and every benefit then get. The majority of that generation is not going to file a claim over a minor strain, unless they have a history of this behavior.  If they do have this history, when you run an ISO see this evidence and you’ll know the type of person you have on your hands. Most of these workers are going full speed until their back or shoulder finally succumbs to the years of blue collar labor.  So the injuries typically are bad, and so bad that it may have limited surgical success.  In fact, this injury may be what finally takes them out of the workplace for good due to permanent restrictions or a marginal prognosis.

 

  1. They accept honestly and reality. To the point above, as claims professionals we need to be honest with them.  The more the claims person plays games, the quicker they will run to obtain Counsel.  They also may not run to Counsel and may just mediate representing themselves.  Those are the wild card cases, and in front of a Magistrate of Judge this seasoned worker may come off as the perfect witness.  The last thing the carrier wants is to be backed in to a corner by playing the big business insurance company card.  Be honest with them, present them with their options, and handle the case fairly.

 

  1. The best result will be to settle and move on. Chances are it will be difficult to vocationally rehab a worker in their 60s.  They carry a high wage, they have a specific set of skills, and some just flat out do not want to work at the local hardware store as a greeter.  So don’t waste your time–just cut to the chase.  If the injury is bad enough to remove them from their workplace home, if you can settle a case on a full/final basis just plan on it and move it  to that point as quickly as you can.  You will save time, legal cost, vocational costs, and costs on everything else.

 

At the end of the day, this worker gave the majority of their lives to said employer.  Thousands of hours of manual labor, through thick and thin.  So take this long term worker, and help them learn and accept the fact that this is the proverbial end of the road.

 

Settlement Issues and Options to Consider

“The only good file is a closed file!”  This is a saying that echoes across claim management teams around the country.  Reaching that goal is filled with barriers and pitfalls that everyone working on a file should take notice of when working toward this goal.

 

 

Drafting the Perfect Settlement Agreement

 

While legal counsel draft most settlement agreements in workers’ compensation claims, it is important that claim professionals do not assume the agreement is ready for circulation.  A complete review of every agreement is necessary before it can be sent to opposing counsel.  Here are some factors to consider when reviewing this important document.

 

  • Review the document to make sure it meets your expectations and authority. It is important to double check payment amounts and verify the items you intend to close-out are actually referenced in the agreement.  Remember that most courts interpret settlement agreements consistent with contract law principles.  As a result, this document will be interpreted against the party who drafted it if found to be ambiguous.

 

  • Pay particular attention to representations and statements of material fact. This is a requirement in most jurisdictions.  All statements should be in clear and concise sentences and avoid legalese.  It is also important to make sure elements such as an average weekly wage and the itemization of benefits already paid are stated in the document, if required.

 

 

Other Important Considerations

 

In workers’ compensation claims, the law has evolved to the point where there are a number of other issues to consider.  These considerations include potential subrogation rights, the length or term of a medical close-outs (e.g. – closure of medical benefits “to-date” or for a certain period) and issues concerning the disability status of a claimant.  Concerns regarding Medicare’s interests is another hot-button issue.

 

 

Dealing with Medical Providers

 

The rights and interests of medical providers and insurers is also an important issue to consider.  In some jurisdictions, these parties have special rights of intervention that must be considered and outlined in a settlement agreement.  In other parts of the country, these stakeholders have little to no recourse if they are not involved in a settlement.  Be sure to know the law in the jurisdiction you are settling a case.  Consultation with legal counsel may also be required.

 

 

Use of Structured Settlements

 

Structured settlements are a cost effective and creative tool parties can use to settle workers’ compensation cases.  They also add value to just about any settlement and provide a “savings” for insurance carriers.

 

Prior to considering a structured settlement, it is important to understand the special tax rules that apply.  This information can be obtained from a broker who can also assist in presenting options based on the facts of the case.

 

  • Benefits to the Injured Party: Claimants can benefits from a structured settlement in their workers’ compensation case as it spreads the payment of their settlement out over a period of time and provide for a consistent flow of non-taxable income.  They can also earn interest on their settlement proceeds at a rate higher than they would receive if their money was placed in a traditional savings account.

 

  • Benefits to Insurance Carriers: Use of a structured settlement “reduces” the amount of money spent on a settlement and provides for creative settlement options.  This is especially helpful in high exposure cases, but can be used effectively in typical cases.

 

  • Benefit to Attorneys: Structured settlements benefit plaintiff and defense attorneys.  It also provides for them to reach a creative settlement and obtain a “win” for their client(s). Interesting enough, attorneys also find value in structuring their own attorney fees.

 

When using a structured settlement, parties have a number of different payment options.  These include annual payments based on the claimant’s life expectancy and the amount the case settlement amount.  Payment option can be made through the end of person’s life, or for a fixed period of time.  Use of a structured settlement can also be used to fund a Medicare Set-aside.

 

Here is an example of how a structured settlement can provide value, savings and creativity to your case:

 

The parties agree to a settlement amount of $500,000, which will be settled via a structured settlement.  By working with a broker, the insurance carrier was able to purchase an annuity through a life insurance company.  The broker was also able to secure a rated age for the injured party that further drove down the actual cost of the annuity due to co-morbid conditions of heart disease and diabetes.  The final terms are as follows:

 

  • Agreed upon settlement amount: $500,000
  • Savings via rated age: $45,000
  • Savings via annuity payments versus the lump sum: $106,000
  • Total savings: $151,000
  • Total payments to the Employee: $500,000

 

 

 

Vacation of Settlement Agreements

 

Having a settlement agreement at some point in the future is the last thing any defense attorney or claims management professional wants to happen.  While it is impossible to draft an ironclad agreement in most jurisdictions, there are steps that can be taken to prevent this from happening.

 

While the law varies, most states allow a settlement agreement to be vacated if there is a mutual mistake of fact, newly discovered evidence, fraud or a substantial change in the claimant’s condition.  In order to avoid this from happening, several best practices can be included in an agreement to prevent this from taking place:

 

  • Include a series of questions in the agreement that outline the claimant’s affirmative understanding of the agreement. It is also suggested to have the claimant affirm in writing that they reviewed the entire document, had it explained to them by their attorney, they understand the seriousness of their injury and that the condition(s) may worsen in the future.

 

  • Dealing with pro se litigants should make claim management professionals to take extra caution in their agreements. In order to avoid problems in the future, they can suggest the agreement be reviewed by an attorney or request the matter be placed on for a hearing in front of a compensation judge where the claimant will need to acknowledge the settlement terms “on the record.”

 

 

Conclusions

 

Settling workers’ compensation claims in a cost effective manner is the dream of every claim professional. Structured settlements are valuable tools to incorporate in the settlement strategy and negotiation process. Often times, a good claim is a settled claim.

 

 

Author Michael B. Stack, CPA, Principal, Amaxx Risk Solutions, Inc. He is an expert in employer communication systems and helps employers reduce their workers comp costs by 20% to 50%. He resides in the Boston area and works as a Qualified Loss Management Program provider working with high experience modification factor companies in the Massachusetts State Risk Pool.  He is co-author of the #1 selling book on cost containment, Your Ultimate Guide To Mastering Workers Comp Costs www.reduceyourworkerscomp.com. Contact: mstack@reduceyourworkerscomp.com.

 

©2015 Amaxx LLC. All rights reserved under International Copyright Law.

 

SALES TO PAY FOR ACCIDENTS CALCULATOR:  http://reduceyourworkerscomp.com/sales-to-pay-for-accidents-calculator/

MODIFIED DUTY CALCULATOR:   http://reduceyourworkerscomp.com/transitional-duty-cost-calculators/

WC GROUP:  http://www.linkedin.com/groups?homeNewMember=&gid=1922050/

SUBSCRIBE: Workers Comp Resource Center Newsletter

 

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

 

Ringler Associates: Celebrating 40 Years in Structured Settlements

Since 1975, Ringler Associates has been a huge player in the structured settlement industry and this year, celebrating a 40th Anniversary! On this Ringler Radio podcast, host Larry Cohen joins colleague,  Mike Casey  and one of the original five Ringler hires, Cecil Matthews, as they discuss  the structured settlement industry and how far they have come, share some personal stories about the people they have met along the way and pay tribute to a pioneer in the industry, David V. Ringler.

 

Click here for audio excerpt

 

Click here for the entire podcast  

 

 

About Ringler Associates

 

Ringler Associates, Inc. is the largest structured settlement company in the United States with over 140 consultants in more than 60 major cities. Established in 1975, the company is a team of experienced professionals who have earned the trust of all parties involved in the structured settlement process. Every Ringler Associate takes an individualized, customer-focused approach to each case, backed by the strength and resources of a national company to collaborate with injured people, attorneys and insurance professionals providing the best settlement solutions for claimants and their families.

 

The MSA Process: To Review Or Not To Review

In William Shakespeare’s play Hamlet, Prince Hamlet of Denmark agonizes over his sanity and speaks one of the most famous lines in English literature, “To be, or not to be, that is the question!”  While the Prince Hamlet could not have known about the perils of the Medicare Secondary Payer Act, he clearly could understand the tribulation of claim handlers as they ponder the issue of submitting a Medicare Set-Aside (MSA) for review and approval.

 

 

What Does CMS Require?

 

According to 42 C.F.R. §411.46 (b) (2), “If a settlement appears to represent an attempt to shift to Medicare the responsibility for payment of medical expenses for the treatment of a work-related condition, the settlement will not be recognized.”  An MSA is a tool that can be used to comply with the Medicare Secondary Payer Act and its regulatory framework.

 

Although Medicare’s warning is serious, it is important to be clear that CMS review of an MSA is never required.  If at the time of settlement, the injured worker is not a Medicare beneficiary, the injured worker or party does not have a reasonable expectation of becoming eligible for Medicare benefits, or if the settlement does not close out future medical care and treatment that is otherwise covered by Medicare, an MSA may not be necessary.  Caution still needs to be used after careful review to determine if the settlement shifts the burden onto Medicare.

 

 

CMS Review Provides Certainty

 

By obtaining approval from the Centers for Medicare and Medicaid Services (CMS) prior to final settlement, all parties receive certainty from future government action or non-recognition of a settlement.  CMS has stated that in workers’ compensation cases, they will only review settlements that meet the following review thresholds:

 

  1. The individual is a Medicare beneficiary at the time of settlement and the total settlement is greater than $25,000, OR
  2. The individual is not a Medicare beneficiary at the time of settlement, but the “total settlement” is over $250,000 AND there is a “reasonable expectation” of Medicare entitlement within 30 months of the settlement date.

 

Settlements not meeting these review thresholds should still consider and protect Medicare’s interests in order to comply with the Medicare Secondary Payer Act.

 

 

Items to Consider in Your Cases

 

Every workers’ compensation case is unique and should be analyzed in its facts and merits.  Medicare Secondary Payer compliance starts with identifying claimants who are Medicare eligible or will be Medicare eligible in the near future.  The following additional steps can also be taken:

 

  1. Have file materials reviewed to determine what services a claimant may require in the future and the projected cost of the treatment. Special consideration should be given to services, treatment modalities and prescription medications covered by Medicare.
  2. Proper preparation for mediation/arbitration and hearing. This includes investigation of Medicare’s conditional payments and considering Medicare’s future interests.  Failing to consider these matters in advance can lead to delay in reaching a settlement.  Given recent case law developments, it is essential that every aspect of Medicare Secondary Payer compliance is discussed and memorized as part of a settlement.  While you cannot plan for every contingency, it is important these matters are discussed so valuable time is not wasted in post-settlement litigation and enforcement.
  3. Determining in advance whether the parties want to seek Medicare approval of a MSA or take other steps to comply with the Medicare Secondary Payer Act. This should be discussed with your clients and the other stakeholders in a settlement.  Once a plan is determined, it is important to cooperate and communicate with all parties in the preparation of a MSA, and its review and approval.

 

 

Author Michael Stack, Principal of Amaxx Risk Solutions, Inc. He is an expert in employer communication systems and helps employers reduce their workers comp costs by 20% to 50%. He resides in the Boston area and works as a Qualified Loss Management Program provider working with high experience modification factor companies in the Massachusetts State Risk Pool.  As the senior editor of Amaxx’s publishing division, Michael is on the cutting edge of innovation and thought leadership in workers compensation cost containment. http://reduceyourworkerscomp.com/about/.  Contact: mstack@reduceyourworkerscomp.com.

 

©2015 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law.

 

SALES TO PAY FOR ACCIDENTS CALCULATOR:  http://reduceyourworkerscomp.com/sales-to-pay-for-accidents-calculator/

MODIFIED DUTY CALCULATOR:   http://reduceyourworkerscomp.com/transitional-duty-cost-calculators/

WC GROUP:  http://www.linkedin.com/groups?homeNewMember=&gid=1922050/

SUBSCRIBE: Workers Comp Resource Center Newsletter

 

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

 

 

 

Practice Win-Win in Your Settlements Via Structured Settlements

Current settlement claim best practices trends suggest the usefulness of using structured settlements in workers’ compensation claim settlements.  By incorporating the use of this tool, parties can accomplish their settlement objective and promote increased efficiency in the claim handling process.

 

 

Using a Structured Settlement To Win

 

The claims management team at ABC Insurance Company is faced with several challenging workers’ compensation claims that have significant future indemnity and/or medical exposure.  Making matters worse, there is a directive by upper management to settle a number of the “old dog” claims.

 

At the same time, the law firm of X,Y, & Z is representing a number of these same claimants.  The attorneys are concerned about addressing their clients’ future needs and protecting Medicare’s interests. They attorneys want to make sure they preserve their clients’ entitlements to qualify for government benefits – SSDI, Medicare and Medicaid.

 

Is there a way to settle these cases where everyone receives the “win” in their workers’ compensation case?  If so, what can the parties do to be zealous advocates for their respective positions while at the same time reach a compromise?

 

 

Reaching a Common Ground

 

While working toward a settlement, the parties come to an early understanding that settling these troublesome claims is going to cost around $500,000.  The claims manager at ABC Insurance Company understands this reality, but is looking for alternatives to meet their bottom line.  The attorney from X,Y,& Z is happy their client will hit their pay day with this settlement, but has concerns that a lump sum settlement check will be spent quickly and leave their client in a dire financial position.  The negotiations reach an impasse.  The solutions: A structured settlement!

 

The parties agree to a settlement amount of $500,000, which will be settled via a structured settlement.  By working with a broker, the insurance carrier was able to purchase an annuity through a life insurance company.  The broker was also able to secure a rated age for the injured party due to co-morbid conditions and this further reduced the cost of the case.  The final terms are as follows:

 

 

$500,000 – Agreed upon settlement amount

$45,000 – Potential Savings via rated age

$76,000 – Potential Savings via annuity payments versus the lump sum

 

$500,000 – Total payments to the Employee

$379,000 – Total cost of Structured Settlement

 

$121,000 – Total Potential Savings From Structured Settlement

 

 

 

Benefits to the Parties

 

Under this scenario, all parties win!

 

  • Win for the Employee: Case settled and they will receive money from their claim.      By receiving periodic payments, they will have better management of their settlement funds via guaranteed cash flow over their life expectancy, which is tax-free. They may also get more up-front money in the cash component of the settlement.

 

  • Win for the Insurance Carrier: Settling this case frees up funds to meet their financial objectives and help settle other troublesome workers’ compensation cases.  The claim management team is also recognized for bringing efficiency to the settlement process. Business objectives, achieved.

 

  • Win for the Employee’s Attorney: They were able to protect their clients’ interests and be creative in protecting their future. Not only do they have a satisfied client, but they also helped their client have financial stability.

 

 

Conclusion: Mission Accomplished!

 

Structured settlements provide all stakeholders in workers’ compensation settlement to bring creativity and efficiency to the settlement process.  They allow all parties to have a “win” in settling cases.

 

 

 

Author Michael B. Stack, CPA, Principal, Amaxx Risk Solutions, Inc. is an expert in workers compensation cost containment.  He is based in Boston, MA and works with employers to reduce their workers compensation costs by 20% to 50%. He is a writer, speaker, and website publisher.  http://reduceyourworkerscomp.com/about/.  Contact: mstack@reduceyourworkerscomp.com.

 

 

Editor: Duke T. Wolpert, Vice President of National Marketing, Ringler Associates is responsible for new business development across the carrier, TPA, and self-insured marketplace in the U.S. and Canada. Prior to joining Ringler Associates, Duke held leadership positions in the insurance, compliance and managed care industries.  www.ringlerassociates.com.  Contact: dtwolpert@ringlerassociates.com

 

 

©2014 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law.

 

SALES TO PAY FOR ACCIDENTS CALCULATOR:  http://reduceyourworkerscomp.com/sales-to-pay-for-accidents-calculator/

MODIFIED DUTY CALCULATOR:   http://reduceyourworkerscomp.com/transitional-duty-cost-calculators/

WC GROUP:  http://www.linkedin.com/groups?homeNewMember=&gid=1922050/

SUBSCRIBE: Workers Comp Resource Center Newsletter

 

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

 

Structured Settlements: Finding Value At No Cost

Structured settlements are a unique tool available for all stakeholders in personal injury and workers’ compensation claims.  Not only does a structured settlement allow these parties to reach efficient settlements, but they also provide all parties the necessary “win” in the case.  Due to the different types of options, it is important to understand how you can maximize your settlement dollars through differing types of structures.

 

 

What are Structured Settlements?

 

A structured settlement is a tool that can be used by parties in a personal injury or workers’ compensation claim to reach a creative solution that benefits all parties.  The “structured settlement” is an arrangement entered into parties where a settlement amount is paid out over a period of time via an annuity.

 

When using a structured settlement, it is important to be aware of the special tax rules that apply.  A structured settlement must be established by:

 

  1. An agreement for a party to accept periodic payments for personal damages that are excludable from gross income as set forth in 26 U.S.C. §104 (a) (2); or
  2. An agreement for a party to accept periodic payments for applicable workers’ compensation benefits that are not considered income per 26 U.S.C. § 104 (a) (1); and
  3. The payments are also those as described in subparagraphs (A) and (B) of Internal Revenue Code Section 130(c) (2), or 26 U.S.C. § 130(c) (2).

 

These periodic payments must also be paid as follows:

 

  1. A party to personal injury type lawsuit or workers’ compensation claim; or
  2. A party who has assumed liability for the periodic payments under a qualified assignment per 26 U.S.C. § 130.

 

 

How are Structured Settlements Used?

 

In a typical structured settlement, an initial lump sum that is paid is referred to as “seed money.”  Additional sums of money are then paid out usually on an annual basis, which is called “feed money.”  These amounts are paid out at a fixed or variable interest rate.  The terms of payout can also be negotiated through the life of the party or for a fixed period of years.

 

 

Benefits of Structured Settlements

 

Structured Settlements provide the necessary “win-win” dynamic that is important when trying to resolve troublesome personal injury and workers’ compensation claims.  It also allows the parties to be innovative and collaborative in the settlement process where all parties can be involved.

 

In addition to these factors, the use of a structured settlement benefits the injured parties and insurance carriers.

 

 

Benefits to the Injured Party

 

When a person suffers a disabling personal injury, they are often left in a position where they are facing loss of income and future expenses that make financial planning a necessity.  By using a structured settlement, an injured party has the following additional benefits:

 

  1. Flexible terms that include guaranteed or deferred income;
  2. Tax-free settlement monies, provided they meet the Internal Revenue Code criteria;
  3. Better interest rates than available in traditional savings or money market accounts; and
  4. Interest bearing annuity that provides payments in the future.

 

 

Benefits to the Insurer

 

There are also benefits to insurance carriers for using a structured settlement in a personal injury or workers’ compensation claims.  Some of these benefits include:

 

  1. Creative settlement solution to provide for the future needs of person who may require future medical care, treatment, disability and/or loss of future earning capacity;
  2. Expedited resolution of claims—especially troublesome claims; and
  3. Provides for release of future liability by the carrier.

 

The use of structured settlements can also be used to fund Medicare Set-Asides in personal injury and workers’ compensation claims.  This provides a “savings” to the employer and insurer and lessens the chance the Medicare Set-aside will be depleted prematurely.

 

 

Example of Savings through a Structured Settlement

 

A Hypothetical:  The parties to a workers’ compensation settlement are struggling to settle a significant claim with the following factors:

 

  Claimant Projected Annual Medical Cost = $20,000

–   Total MSA exposure = $552,600

 

Cost to Fund MSA  with Lump-Sum Payment  =  $552,600

 

Instead of funding the MSA via a lump sum payment, the insurance carrier is able to use a structured settlement, which includes a rated age.  The annuity has an initial payment (seed money) of $40,000, plus annual payments over the course of the annuity totaling $287,708.  As a result, the followings savings are realized by the carrier:

 

Cost of Fund MSA with Structured Settlement = 

 

$327,708

Total Savings = 

$224,892

 

 

Conclusions

 

There are clearly benefits to settling a workers’ compensation or personal injury claim through a structured settlement.  However, the savings can vary depending on the type of settlement you use and other factors, including the use of a rates ages.  It is important to consider these factors to maximize your settlement dollars—both real and perceived.

 

 

 

Author Michael B. Stack, CPA, Principal, 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.  http://reduceyourworkerscomp.com/about/.  Contact: mstack@reduceyourworkerscomp.com.

 

©2014 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law.

 

SALES TO PAY FOR ACCIDENTS CALCULATOR:  http://reduceyourworkerscomp.com/sales-to-pay-for-accidents-calculator/

MODIFIED DUTY CALCULATOR:   http://reduceyourworkerscomp.com/transitional-duty-cost-calculators/

WC GROUP:  http://www.linkedin.com/groups?homeNewMember=&gid=1922050/

SUBSCRIBE: Workers Comp Resource Center Newsletter

 

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

Happy 49th Birthday Medicare

Medicare is a government based health insurance program that has provided coverage for countless Americans.  While everyone knows something about the program, few know how this program was created and the challenges stakeholders face to ensure the program’s solvency.

 

 

Background on Medicare

 

In 1965, amendments to Title XVIII of the Social Security Act were passed by Congress and later became law.  By signing this bill into law, the Medicare program was created as a promise to provide medical insurance for persons over the age of 65 years old, regardless of income.  The program currently provides coverage to younger people who have permanent disabilities and receive Social Security Disability Insurance (SSDI) payments, those who have end-stage renal disease (ESRD) and amyotrophic lateral sclerosis (ALS, or Lou Gehrig’s disease).

 

 

Considering Medicare’s Interests: Medicare Secondary Payer

 

The Medicare Secondary Payer Act (MSP) was signed into law on December 6, 1980.  There is little legislative history regarding the Act.  The MSP has been codified under 42 USC § 1395y (b).  It was initially unenforced and ignored by CMS and attorneys settling workers’ compensation and personal injury claims.  However, with the aging of the U.S. population becoming more commonplace, the insurance industry and attorneys started to take notice of the Act in the mid-1990s. This was followed by the issuance of policy memoranda by CMS starting in 2001 regarding compliance with Medicare Secondary Payer regulations.

 

 

Medicare Expansion with Parts C and D

 

In 2003, Congress added additional benefits to the Medicare Part C program through the Medicare Modernization Act of 2003 (MMA).  Under the MMA, “Medicare+Choice” programs were made more attractive by adding prescription drug coverage, which are now referred to as “Medicare Advantage Plans.”  These plans are offered only through private companies known as Medicare Advantage Organizations (MAO). Under this program, private insurance companies are required to offer services and other items not covered under the traditional Medicare program.

 

 

Section 111 Reporting

 

Congress has enacted additional legislation to assist CMS in recouping Medicare’s interest in reimbursement. Under various amendments to the Medicare, Medicaid and SCHIP Extension Act (MMSEA) of 2007, mandatory insurer reporting requirements were enacted, which require all insurers and self-insurers to report those claimants who are receiving Medicare benefits at the time any payment is made on a claim.  It is very likely that counsel for the Department of Health and Human Services is looking for a test case on Medicare to use in its enforcement of the Medicare Secondary Payer Act in liability cases.

 

 

SMART Act and CMS Processes

 

During a majority of the 111th and 112th Congresses, the SMART Act received little attention from lawmakers.  The bill’s progress was later overshadowed by the impending “fiscal cliff” debate that gripped the United States in late 2012.  In the late hours of the 112th Congress, the SMART Act was incorporated via amendment into the Medicare IVIG Access Act (H.R. 1845) and passed with nearly unanimous support.  While the SMART Act did not accomplish all that it was hoped for, it does mark increased awareness by congressional leaders of all ideological viewpoints of the importance Medicare plays in our society and the need for reform in the settlement process of personal injury and workers’ compensation cases involving conditional payments.

 

 

Conclusion

 

Now that you have a better understanding of the Medicare program, see how you do on this brief Medicare quiz.

 

1)      Which President signed the Medicare program into law?

 

A: Lyndon B. Johnson

 

2)      On what date was the Medicare program signed into law?

 

A: July 30, 1965.  Happy 49th birthday, Medicare!

 

3)      Who was the first Medicare beneficiary?

 

A: Harry S Truman

 

4)      What President signed the Medicare Secondary Payer Act into law?

 

A: Jimmy Carter

 

5)      Where can the term “Medicare Set-Aside” be found in the United States Code?

 

A: Nowhere!  The term is a legal fiction first coined in the late 1990s to describe a process, which can be used to consider Medicare’s interests in personal injury and workers’ compensation settlements.

 

 

 

 

Author Michael B. Stack, CPA, Principal, 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.

 

©2014 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law.

 

WORK COMP CALCULATOR:   http://www.LowerWC.com/calculator.php

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

WC GROUP:  http://www.linkedin.com/groups?homeNewMember=&gid=1922050/

SUBSCRIBE: Workers Comp Resource Center Newsletter

 

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

 

The Benefits Of A Structured Settlement

Injured employees who do not have a financial background often do not understand the reasons for a structure settlement. Frequently, if the employee is not properly advised by his/her attorney, the employee will say “give me the money, and I will manage it”. However, once an injured employee learns the benefits of a structured settlement, they almost always opt for the structured settlement of both their indemnity and their medical claims. Structured settlement benefits include:
Steady Income:
A structured settlement normally provides periodic payments over a specific period of time or for the life expectancy of the injured employees. Injured employees, who are expecting a future pension and/or social security benefits, may opt for higher monthly periodic payments to their retirement age than for lower periodic payments for life.
Tailored Payments:
A structured settlement can be tailored to the future financial needs of the employee, whether it is a down payment on a home, a child’s college education, or any other future major expense.

 

Financial Security:
The injured employee does not have to worry about where his/her future income will come from. A structured settlement provides financial security by guaranteeing the employee the periodic payments.
Spousal Income:
A structured settlement can be based on the combined life expectancy of the injured employee and spouse, instead of just the injured employee’s life time. This is often done when the injured employee is concerned not only about his/her present needs but also about the spouse’s financial well-being after the employee’s death.

 

Tax-Free Income:

Federal income-tax law considers the periodic payments of a structured settlement to be payments for the injury. The periodic payments are tax-free of both federal and state income taxes. If the employee received a lump-sum payment in settlement of the injury, the lump-sum would be tax free, but all interest or dividend income earned on the lump-sum amount would be subject to federal income tax.
Cash:
A structured settlement can be tailored to provide the employee a lump sum at the time of settlement to cover any immediate financial needs like paying off debts or replacing the family car (but that also lowers the amount of each periodic payment).
Money Management:
Various studies have shown that approximately 80% of injured employees who receive a lump sum settlement will have squandered the entire amount of the lump sum within 5 years. A structured settlement protects the injured employee from mismanaging the money they will need over their life time.

 

Medical Cost Management:
In addition to the structure settlement of the indemnity portion of the workers’ compensation claim, a second structure settlement of the cost of the future medical care can be provided for the injured employee. A medical cost projection can be completed to establish the estimated cost of future medical care. A structured settlement of the medical cost with an independent administrator of the payments for medical services can relieve the injured employee of trying to manage the medical care cost.

 

 

When a structured settlement is properly explained to an injured employee, the employee will almost always chose the financial security and peace of mind that a structured settlement provides. For more information on structured settlements, or to talk to a structured settlement specialists, please contact us.

 

 

 

Author Michael B. Stack, CPA, Principal, 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.

 

©2014 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law.

 

WORK COMP CALCULATOR:   http://www.LowerWC.com/calculator.php

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

WC GROUP:  http://www.linkedin.com/groups?homeNewMember=&gid=1922050/

SUBSCRIBE: Workers Comp Resource Center Newsletter

 

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

 

 

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