Effectively Use Mediation to Settle More Workers’ Compensation Claims

The use of mediation as a means of effective alternative dispute resolution in workers’ compensation is gaining momentum across the United States.  Given the highly litigious nature of many workers’ compensation claims, mediation promotes the involvement in all interested stakeholders and allows parties to resolve their claims in a timely manner.

 

Members of the claims management team who fail to prepare for mediation will not see its benefits.  Anyone seeking to promote efficiency and reduce workers’ compensation costs must take proactive action in order to make the most of a mediation session.

 

 

Effective Use of the Mediation Process

 

Alternative dispute resolution in workers’ compensation systems can be used even if it is not required or endorsed by a state industrial commission.  The process starts when the employee and employer/insurer agree to use a neutral third party to help resolve their dispute.  When agreeing to do so, it is important to invest time and effort in reaching a settlement.  Terminating the mediation session at the first sign of tension is never helpful.

 

Preparing for medication is key.  All interested stakeholders must take the following steps:

 

  • Evaluate the claim and set realistic expectations for settlement. While issues such as “pain and suffering” are important to any injury-related case, this is something that does not add value to the underlying claim;

 

  • All interested stakeholders must be present and willing to work hard toward settlement. This includes being physically present at the mediation settlement and willing to sometimes work through lunch or late into the day.  Be prepared for downtime and keeping occupied and focused; and

 

  • Include interested parties and settlement services in the mediation session. Effectively settling a workers’ compensation claim involves many complex issues and considerations. Leverage the following services to prior to and during mediation:

 

– Defense attorney: Attorneys must play an active role in managing the emotional nature of settlement negotiations, and are a key relationship to leverage early in the claim.

 

– Settlement Consultant: A settlement consultant can assist the parties to understand the different options available, help identify the true wants and needs of both sides, and provide a negotiation tool to help bridge the gap of negotiations and bring about a successful resolution to the case.

 

– Professional Administrator: A professional administration handles many of the administrative tasks on behalf of the injured worker once they’ve settled their Workers’ Compensation claim and can provide piece of mind to address many of the injured worker’s fears and concerns prior to settlement.

 

 

Be Prepared; Be Willing to Compromise

 

Preparing for mediation is key for all involved parties.  Steps members of the claims management team must take include:

 

  • Receiving an updated case analysis from your settlement team. Request that this be provided in advance so one can receive clarification, properly set reserves and provide adequate settlement authority;

 

  • Communicate with defense counsel and settlement services well in advance of mediation and develop a strategy. Make sure a confidential mediation statement is also sent to the mediator in advance.  This statement should outline the claims, defenses, and evaluation of the case.  It may also be helpful to provide a statement as to how you see the issues being resolve; and

 

  • Be realistic and willing to compromise. In a settlement via mediation, all parties are able to have a role in resolving a case and be heard.  It is important that there be a willingness to find a happy medium – a “win” for everyone.

 

 

Effectively Working with the Mediator

 

It is important to work with your settlement team to select the right mediator.  This is because each mediator has their own style.

 

The style of a mediator may also be important depending on the unique facts of a case.  Some of these could include matters involving a pro se claimant, a claimant who is a recent immigrant (cultural sensitivity is an important consideration), someone who is older (or younger) or one who has had many prior workers’ compensation cases.

 

It is also important to be open and honest with a mediator.  If there is information a party does not want to be disclosed to the other side, make sure you are clear when sharing this information.  Never lie and do not be evasive.

 

 

Conclusions

 

Mediation is a great tool to use when settling workers’ compensation cases. In many instances, it provides for fast and effective resolution to reduce program costs.  When using this tool, it is important to prepare for and be willing to compromise.  It is also important to work with the mediator in an effective manner.

 

 

Michael Stack - AmaxxAuthor Michael Stack, CEO Amaxx LLC. He is an expert in workers’ compensation cost containment systems and helps employers reduce their workers’ comp costs by 20% to 50%.  He works as a consultant to large and mid-market clients, is a co-author of Your Ultimate Guide To Mastering Workers Comp Costs, a comprehensive step-by-step manual of cost containment strategies based on hands-on field experience, and is founder & lead trainer of Amaxx Workers’ Comp Training Center.

 

Contact: mstack@reduceyourworkerscomp.com.

Workers’ Comp Roundup Blog: http://blog.reduceyourworkerscomp.com/

 

©2018 Amaxx LLC. 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.

You’re Fired! Using Employment Releases in Work Comp Settlements

You’re Fired! Using Employment Releases in Work Comp SettlementsMany workers’ compensation cases that are settled include the voluntary resignation of the employee.  When this is the case, the employer/insurer request the employee sign an employment resignation and release document as part of the global agreement.  Failure to understand this process can result in added costs and missed objectives any settlement.

 

 

Meeting Expectations and Avoiding Miscommunications

 

The employment resignation and release is a legal contract between the employer and employee.  Given the nature of this agreement, it is outside the scope of a workers’ compensation insurance policy.  This adds to the complexity of settling a claim that includes employment law issues and requires each party to understand their proper role:

 

  • Defense Attorney: Attorneys representing the employer/insurer need to consider many   These factors include the scope of their representation in the claim and understanding of the law in employment matters.  Any misstep can result in unwanted malpractice claims and professional conduct or ethics violations;

 

  • Insurance Carrier: Members of the claims management team need to be in communication with the employer regarding the resignation of an employee as part of a global workers’ compensation settlement.  The consideration or money paid under an employment release is not covered under the workers’ compensation insurance contract;

 

  • Employer: Representatives from the employer need to remember adequate consideration in a release makes an employment law release a binding contract.  They also need to communicate their expectations to the insurance carrier and defense attorney regarding materials terms and conditions of the agreement.  They can also be expected to pay for legal services rendered for the preparing of the release; and

 

  • Employee’s Attorney: Monies paid under an employment release is taxable income under the Internal Revenue Code.  This tax needs to be fully explained to the employee.  There can also be considerations for potential legal malpractice and ethical violations if the expectations and terms are not explained fully to the employee.

 

 

The Basic Elements of an Employment Release

 

Given the contractual nature of an employment release, it needs to be in writing and have several key elements.  Failure to include these items can result in unnecessary and costly litigation:

 

  • Writing: All voluntary resignations and release agreements must be in writing.  It should outline how payments will be made and to whom it will be delivered.  The release should also include the timing of payments as there is usually a rescission period outlined by state law.  Payments should also be properly characterized for income tax purposes;

 

  • Monetary Consideration: The payment of money is a necessary component for such release – it is referred to as “consideration.”  This exchange is generally a nominal amount based on local custom and statutory guidelines, if applicable.  The employer is the party responsible for making this payment; and

 

  • Other Matters of Concern: A typical release includes discussion of other issues.  This discussion can include issues considering future reference letters, non-disclosure clauses (and what happens if material issues are disclosed to an unauthorized party) and “non-disparagement” agreements.

 

Mistakes in these areas commonly occur when lawyers with little understanding of employment law matters are involved in the drafting of voluntary resignations and releases.  It is also important to understand applicable state and federal laws such as the Fair Labor Standards Act, American with Disabilities Act and Family Medical Leave Act.

 

 

Waiting Periods and Settling a Work Comp Claim

 

The time frame for the rescission of a voluntary resignation and employment release is another important issue as they sometimes interfere with the settlement of a workers’ compensation claim.  As a general rule, parties should wait at least 21 days after signing a release before making payment per the workers’ compensation settlement.  Failure to understand this can cause a situation where a penalty arises.

 

 

Conclusions

 

Having the employee voluntarily resign from a position in a global workers’ compensation claim is something to consider as stakeholders seek to reduce workers’ compensation program costs.  When incorporating these agreements into a global settlement, it is important to avoid pitfalls that may arise when using releases.  All interested stakeholders should be aware, seek component legal advice and plan accordingly.

 

 

 

Michael Stack - AmaxxAuthor Michael Stack, CEO Amaxx LLC. He is an expert in workers’ compensation cost containment systems and helps employers reduce their workers’ comp costs by 20% to 50%.  He works as a consultant to large and mid-market clients, is a co-author of Your Ultimate Guide To Mastering Workers Comp Costs, a comprehensive step-by-step manual of cost containment strategies based on hands-on field experience, and is founder & lead trainer of Amaxx Workers’ Comp Training Center.

 

Contact: mstack@reduceyourworkerscomp.com.

Workers’ Comp Roundup Blog: http://blog.reduceyourworkerscomp.com/

 

©2018 Amaxx LLC. 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.

Effective ERISA Recovery in Workers’ Comp Settlements

Effective ERISA Recovery in Workers’ Comp SettlementsMembers of the claims management team and workers’ compensation defense attorneys need to understand a number of issues to be effective.  In the area of resolving liens from workers’ compensation claims, it is important to recognize the complex issues associated with ERISA liens.  Failure to do so can result in added time handling a claim, as well as additional and unnecessary expenses.

 

 

What is ERISA?

 

The Employee Retirement Income Security Act (ERISA) was passed into law by Congress in 1974.  ERISA is codified in part at 29 U.S.C. §18, et seq., and establishes minimum standards for pension plans and other employee benefit plans.

 

ERISA claims arise when an employer-sponsored group health plans (GHP) provided by a private medical insurance company under the law pay for medical care and treatment arising from a workers’ compensation claims.  Given the unique nature of a qualifying ERISA plan, their ability to recover is defined by federal law and contractual language – not by state laws that would otherwise be applicable.

 

 

Determine ERISA Application

 

As a general rule, ERISA only applies to Plans created under the Act and “self-funded” by an employer who assumes the financial risk for providing health care benefits to its beneficiaries.  Generally, ERISA does not cover plans established for government agencies, churches or plans used to comply with state workers’ compensation laws, unemployment or disability matters.

 

The unique nature of ERISA Plans places additional burdens on parties to workers’ compensation claims.  The result is often an unwillingness of qualifying Plans to negotiate reduced settlements.  Due to the distinct nature of applicable Plans, federal law allows for them to bring a civil action to recover under 29 U.S.C. §1132(a)(3).

 

 

 

ERISA Plan Language: The Devil in the Details

 

All ERISA Plans have language explaining their rights of recovery in instances where medical benefits were paid on behalf of the claimant in a workers’ compensation and other personal injury claims.  Examples of Plan language with expansive recovery rights include the ability to be reimbursed “in full, and in first priority, for any medical expenses paid by the Plan relating to the injury or illness.”  In these instances, courts have largely ignored equitable arguments such as the “Made Whole Doctrine,” which limit recovery by an interested third party.  Due to the rejection of this and other defenses, ERISA Plans are allowed to recover first, and without the need to compromise.

 

 

Practice Pointers when Dealing with ERISA Plans

 

Federal pre-emption and judicially recognized contract interpretations often make it difficult for attorneys and members of the claims management team to resolve ERISA intervention interests.  Notwithstanding the special position of Plans, there are proactive steps one can take to resolve the claims effectively and efficiently:

 

  • Obtain a copy of the Plan contact and reimbursement language. Sometimes a Plan’s right to reimbursement may be favorable to quick resolution and not ironclad;

 

  • Present the facts of the case in a favorable light to your position. Each workers’ compensation claim is different and unique.  Although ERISA Plans have a “super lien,” they are often willing to take a reduced amount based on emotional appeals;

 

  • Keep the Plan administrator or their attorney posted on the status of a claim and include them on all procedural correspondence such as status conference and settlement negotiations; and

 

  • Although ERISA Plans may, in fact, have superior recovery rights, never be a jerk. Instead be respectful at all times.

 

 

Conclusions

 

The unique nature of ERISA often makes it difficult to settle a workers’ compensation claim.  Identifying the interests of the Plans is essential to deal with them productively.  There are also best practices one can implement to resolve claims and benefit the bottom line of a workers’ compensation program.

 

 

Michael Stack - AmaxxAuthor Michael Stack, CEO Amaxx LLC. He is an expert in workers’ compensation cost containment systems and helps employers reduce their workers’ comp costs by 20% to 50%.  He works as a consultant to large and mid-market clients, is a co-author of Your Ultimate Guide To Mastering Workers Comp Costs, a comprehensive step-by-step manual of cost containment strategies based on hands-on field experience, and is founder & lead trainer of Amaxx Workers’ Comp Training Center .

 

Contact: mstack@reduceyourworkerscomp.com.

Workers’ Comp Roundup Blog: http://blog.reduceyourworkerscomp.com/

 

©2018 Amaxx LLC. 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.

4 Times When a Workers Comp Claim Should NOT Be Settled

4 times when NOT to settle a workers comp claimIn the workers’ compensation claims world, a common held belief is “the more settled claims, the better”.  However, there are several times when, a claim should NOT be settled — at least not yet:

 

  • When you are not sure the claim is legitimate – if you are still questioning in your own mind whether the claim is legitimate, or whether your company is “being taken for a ride”, hold off settling the claim until you are SURE. There’s nothing wrong with “going with” your gut instinct. This means you should do two things:

 

  • have your own medical advisor review the file and
  • do a thorough sub rosa investigation over an extended period of time (I don’t mean ONE day — I mean “extended”).

 

  • When it sets a bad precedent in the workplace – If you have the type of workplace that one or two settlements could draw in a whole pack of other claims, then I would tend not to settle the claim. Your company may become known as “an easy mark.” You want to pay the exact benefits due, when they are due so the employee receives what he/she is supposed to. Explain this policy in your Employee Brochure.  If employees think the only way they can get their full benefits is to hire an attorney, they are much more likely to do that. When that’s how things transpired for other injured employees in your workplace, it sends the message that is the only way the employer will pay benefits to which employees are entitled.

 

  • When the employee’s condition could still improve – The appropriate time to settle in cases which should be settled is after the employee has reached MMI (Maximum Medical Improvement). Only at this time will it be known how much the employee will be disabled, how much cost he will incur for future medical care, future lost wages, and other expenses such as home-care.

 

  • When the claim is being settled only because it’s a “nuisance” – Your company will want to determine if they want to take a stance in “nuisance cases” and settle them for “nuisance value” (insignificant amounts) or “defense costs” in order to close the matter. Some companies do, some don’t. Although being in litigation is inconvenient at best and a nightmare at worst, that does not mean you want to settle every inconvenient claim.

 

 

Michael Stack - AmaxxAuthor Michael Stack, Principal, Amaxx LLC. He is an expert in workers compensation cost containment systems and helps employers reduce their work comp costs by 20% to 50%.  He works as a consultant to large and mid-market clients, is co-author of Your Ultimate Guide To Mastering Workers Comp Costs, a comprehensive step-by-step manual of cost containment strategies based on hands-on field experience, and is founder & lead trainer of Amaxx Workers’ Comp Training Center. .

 

Contact: mstack@reduceyourworkerscomp.com.

Workers’ Comp Roundup Blog: http://blog.reduceyourworkerscomp.com/

 

©2017 Amaxx LLC. 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.

3 Indicators Open Work Comp Claims Are Ready to Settle

Spring is in the air—time to do some spring clean.  This should not be limited to your home.  Use it as an opportunity to employ creative settlement strategies and close out those troublesome files and legacy claims that have been collecting dust in your claims department.

 

 

How to Get Started?

 

The first step in the process is to identify cases that are prime for settlement.  This should start with a review of all open files.  Indicators that a workers’ compensation file might be ready for settlement include:

 

  1. Cases where the employee is at, or should be at maximum medical improvement (MMI)/end of healing period. Identification of this factor includes evidence of a healing plateau or continued medical care without improvement of symptomology.

 

  1. Cases where the employee is nearing the end of entitlement for temporary total disability benefits or other wage loss benefits. Most jurisdictions cap the number of weeks an injured worker is entitled to various indemnity benefits.  It is important to review these cases for settlement as it could very well morph into a claim for permanent total disability benefits or costly retraining benefits.

 

  1. Cases where the employee has recently or will become eligible for Social Security Disability and/or Medicare benefits. Entitlement to these benefits drives claims toward the contention the employee is permanently and totally disabled.  These files require an analysis for exposure regarding future medical benefits, including the recommendation for a Medicare Set-aside (MSA).

 

Once you have identified claims ready for settlement, it is important to contact the employee or their attorney regarding settlement.  What do you have to lose?  Nothing!

 

 

Settling Troublesome Cases: Time to Think Outside the Box

 

Settling a workers’ compensation case is like making a sales pitch.  Preparation is key.  This includes thinking of the various alternatives and developing a strategy.  There are also several tools the proactive claims management team has available to kick-start settlement discussions.

 

  • Independent Medical Examinations (IME): Scheduling an IME is a great opportunity to move a case toward settlement.  This can be especially useful for legacy cases where the employee’s treatment has been inconsistent or sporadic.  The findings from an IME can also be used to initiate litigation with the intent of moving the claims file toward settlement.

 

  • Mediation: This is one of the most underutilized tools in workers’ compensation.  Mediation allows for all interested stakeholders to have a voice and role in settling a claim.  It can also be beneficial to understand the concerns of an injured employee and tailor a settlement to suit their needs.

 

  • Structured settlements: This tool can be used effectively in many instances—not just high value settlements.  The employee receives the full value of their settlement, which is paid out over a period of time via an annuity.  There is built-in “savings” when using this tool the insurance carrier receives based on the actual cost of purchasing an annuity contract.  All parties receive “free” advice and services as the broker who prepares the quote and necessary paperwork is paid via commission from the life insurance carrier who initiates the annuity.

 

  • Medicare Set-asides: Failure to settle cases involving Medicare beneficiaries (or those soon to be entitled) is driven mainly by an irrational fear of being reasonable.  This excessive caution can lead to delay and lost settlement opportunities.  Using a service provider to evaluate the risks is helpful.

 

 

Conclusions

 

It is time for spring cleaning in your claims department.  Now is the time to dust off your troublesome files and think about settlement.  This requires interested stakeholders to review their files, engage the other side and use creativity to drive settlements.

 

 

For additional information on workers’ compensation cost containment best practices, register as a guest for our next live stream training.

 

Author Michael Stack, Principal, Amaxx LLC. He is an expert in workers compensation cost containment systems and helps employers reduce their work comp costs by 20% to 50%.  He works as a consultant to large and mid-market clients, is co-author of Your Ultimate Guide To Mastering Workers Comp Costs, a comprehensive step-by-step manual of cost containment strategies based on hands-on field experience, and is founder & lead trainer of Amaxx Workers’ Comp Training Center. .

 

Contact: mstack@reduceyourworkerscomp.com.

Workers’ Comp Roundup Blog: http://blog.reduceyourworkerscomp.com/

Live Stream WC Training: http://workerscompclub.com/livestreamtraining

 

©2017 Amaxx LLC. 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.

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.

 

How To Properly Evaluate Claims for Settlement

Employers will often look at their loss runs on recently closed claims and mutter to themselves “I have no idea of how the claims professional could justify paying that much money for that claim”. How the settlement amount of a particular workers’ compensation claim is determined is often a mystery, but it does not have to be.

 

 

Everything That Occurs Throughout Claim Impacts Settlement

 

The settlement value of a work comp claim is not determined the day the final medical report is received in the claims office.  Everything that has occurred on the claim from the moment the injury happen has an impact on the claim settlement value.  While it is not possible to place a dollar value on every action taken by the claims professional in handling the claim, quality claim handling following the industry ‘best practices’ results in claims being settled for a lower overall cost.

 

The evaluation of the claim for settlement is greatly influenced by the investigation completed by the claims professional into how the injury occurred, the nature of the injury, the extent of medical treatment for the injury, and the duration of the medical treatment. If the investigation of the claim results in a determination that the claim is not compensable, the settlement value is reduced to near zero.  On the other hand, if the investigation verifies the compensability of the injury, the claim will have the full settlement value.

 

Once the work comp claim has been determined to be compensable, the proper integration of medical management and vocational rehabilitation, if needed, will have an impact on the settlement evaluation. Proper medical management throughout the course of the employee’s recovery will prevent the claim from being larger than necessary, and will also facilitate a better settlement.

 

 

Employers Can Have Major Impact on Settlement Value

 

Employers can have a major impact on the settlement value of a workers’ compensation claim.  A primary component of the settlement value of the work comp claim is whether or not the injured employee was able to return to his former employment at the same rate of compensation the employee enjoyed prior to the injury. 

 

Modified duty/transitional duty reduce the cost of the indemnity paid while the claimant is medically treating.  Modified duty also impacts the extent of the disability rating the medical provider will assign. Through a gradual increase in the employee’s working level while complying with the doctor’s work restrictions for the employee, the employer can have the employee back to working full duty by the time the employee is released from further medical care.  When the medical provider knows the injured employee has returned to his prior employment, the permanent partial disability rating the medical provider can justify assigning is reduced.

 

The claims professional will review the medical documentation, both that of the primary medical provider along with any independent medical verification from an independent medical examination obtained by either the claimant or the claims professional.  A detailed analysis of the medical documentation serves as the starting point for the claims professional’s settlement evaluation.

 

 

The analysis of the settlement value will include a review of:

 

  • Medical reports
  • Value of future medical treatment
  • Employee’s compensation rate prior to injury
  • Indemnity rate for permanent partial disability or permanent total disability
  • Impairment rating
  • Future indemnity cost
  • Vocational rehabilitation cost
  • Jurisdiction
  • Any issues in dispute
  • Offsets for social security disability, Medicare and compensation from third parties responsible for the injury

 

A proper settlement evaluation by claims professionals is a settlement range, not a precise number.  For example: A settlement value range of $100,000 to $115,000, not exactly $112,345.67. 

 

 

Most Claims Are Settled Based on Give & Take Negotiations

 

The settlement range reflects the minimum the claims professional calculates to be fair, and the maximum the claims professional is willing to pay voluntarily.  Most claims are settled based on give and take negotiations.  The claims professional should prepare for the settlement negotiation by evaluating and applying both the legal requirements of the jurisdiction and the talking points on what is not mandated by the statutes of the jurisdiction.

 

The settlement value placed on the workers’ compensation claim by the claims professional often differs from the value placed on the claim by the employee’s attorney.  This is often referred to as the settlement gap and is the primary reason claims are adjudicated.  The settlement gap can frequently be bridged by the use of a structured settlement.

 

With a structured settlement the insurer purchases an annuity(s) providing periodic payments over an extended period of time.  The claimant receives a higher total dollar amount while the insurer limits the cost of the claim to the settlement value range determined prior to the start of the settlement negotiations.

 

If the claims professional and the employee/employee’s attorney cannot agree on the settlement value of the claim, every jurisdiction has a state department that oversees workers’ compensation and can provide a judge/commissioner/etc. to assist in resolving the settlement value of the claim.

 

 

 

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.

 

 

Editor: Duke T. Wolpert, Director of 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

 

©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.

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 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.

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.

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