Structured Settlements – Cost Savings and Future Protection

Content Sponsored by Ringler Associates

 

Catastrophic injuries make up less than 1% of all workers’ compensation claims, but various studies have shown that catastrophic injuries can consume 20% of all claim dollars. The dollars spent on a few catastrophic injury claims can be the difference in where the employer’s work comp insurance premiums increase or decrease. The best way to control, or at least have an impact on the cost of catastrophic injuries, is through the use of a structured settlement.

 

Catastrophic injuries that disable an employee to the point where they will always have a permanent partial or permanent total disability, are often difficult to evaluate for settlement purposes. To establish the settlement value and the amount of money that should be used to purchase a structured settlement, the future cost of indemnity, medical and claim related expenses has to be calculated and established.

 

 

Future Indemnity Calculations:

 

  • The injured employee’s average weekly wage and the amount of the weekly indemnity benefit
  • The amount of time the weekly indemnity benefit will be paid, including whether or not the number of weeks is limited by state statute, or will be paid for the remainder of the employee’s life
  • Any change in the amount of the employee’s indemnity payment when the nature of the indemnity payment is changed from temporary total disability to permanent partial disability or permanent total disability
  • Life expectancy of the employee base on the employee’s actual age or the rated age (how long the employee is project to live given the medical condition)
  • Any offset available due to the claimant receiving social security benefits or social security disability benefits

 

This example will show how the futurity indemnity cost has a major impact on the amount of money that can be spent on a structured settlement. Example: The permanent total disability prevents the employee from ever returning to work. The injured employee is man with a weekly indemnity benefit of $600 per week that drops to $500 per week when the medical provider determines he will be permanently totally disabled, at the age of 50. With a 25 year life expectancy, in a state that does not provide for an offset of indemnity benefits when the employee starts to draw social security, the future indemnity exposure is: $500 X 52 weeks = $26,000; $26,000 X 25 years = $650,000.

 

 

Future Medical Calculations:

 

While the future indemnity exposure is normally a straight forward calculation based on the laws of the state where the claim is pursued, the future cost of medical care and the calculations of the amount of money needed for future medical expenses is more complex. Often the adjuster will bring in a certified life care consultant to calculate the future medical cost based on:

 

  • The cost of routine on-going medical care
  • The cost of any planned or projected surgical interventions
  • The cost of modifications to the employee’s home or vehicle (and future vehicles)
  • The cost of home health-care services
  • The cost of institutional medical care
  • The cost of durable medical equipment (wheelchairs, hospital beds, oxygen supplies, artificial limbs, etc.)

 

Depending on the nature and extent of injury, the future cost of medical care could be anywhere from a few thousand dollars to a few million dollars, hence the need for an expert to project the future medical cost, including the amount needed for a Medicare Set-Aside Agreement. If significant, the future medical cost should be a separated structure settlement created to pay the future medical expenses.

 

In addition to the calculations of future indemnity cost and future medical cost in the determination of how much future money will be spent on the claim, consideration must be made for the expenses associated with an on-going workers’ compensation claim. This would include the cost of:

 

  • Defense attorney
  • Nurse case manager
  • Rehabilitation specialist
  • Vocational consultant
  • Actuarial expert

 

 

Structured Settlement Can Create Savings of 30% – 40%

 

Once the future cost of the claim has been established, the amount of money that can be spent on a structured settlement can be calculated. Using the above example where the future indemnity exposure was $650,000, let’s estimate a future medical exposure of $300,000 and a future claim expense of $50,000. On this hypothetical claim the total exposure is $1,000,000. The claim can be settled for a lump sum payment of $1 million dollars, but it makes a lot more sense to settle the claim with a structured settlement.

 

The cost of a structure settlement, where annuities are purchased now to cover future indemnity and medical cost, there is often a savings of 30% to 40% of the long term cost of the claim. This is because the life insurance company providing the annuity or annuities will invest the amount paid for the annuity or annuities to provide the future structured settlement payments as they become due. With this example the exposure to the insurer or self-insured employer created by the catastrophic workers’ compensation claim is $1 million. With the structure settlement, the insurer or self-insured employer could save $300,000 to $400,000.

 

Outside of the cost savings component, structured settlements provide future protection. The employee with the catastrophic injury is often worried about his/her future. Conscientious attorneys will explain to their employee clients how a structured settlement protects them by providing guaranteed future payments of both income and medical care, while also providing them with peace of mind. Hence, the structured settlement reduces claims cost, facilitates the settlement of the catastrophic injury claim and offers the benefits that come with future protection.

 

 

 

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

 

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

 


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

Structured Settlements Can Resolve Legacy Claims Burden

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

 

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

 

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

 

 

Legacy Claims Major Financial Burden

 

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

 

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

 

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

 

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

 

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

 

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

 

Conclusion

 

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

 

 

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

 

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

 

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

 


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

What to Look For in a Structured Settlement Company

 

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

 

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

 

  1. Experience.

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

 

 

  1. Ability to Design Settlements.

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

 

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

 

 

  1. Resources.

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

 

 

  1. Reputation.

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

 

 

  1. Geographical spread.

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

 

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

 

 

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

 

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

 

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

 


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

The Value of Using Structured Settlements When Addressing Medicare Set Asides

 

Medicare Secondary Payer Statute Protects Medicare’s Interests

 

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

 

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

 

Medicare Set Aside Ensures Compliance

 

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

 

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

 

Structured Settlement Offers Many Advantages

 

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

 

The structured settlement of the MSA provides several benefits including:

 

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

 

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

 

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

 

 

A Medicare Set Aside Structured Settlement Example:

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 


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

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

 

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

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

 

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

 


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

 

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

Know the 8 Benefits of Using Structured Settlements to Settle Your Work Comp Claims

Have you ever  noticed how a few catastrophic workers' compensation claims account for a very disproportionate amount of your workers' compensation cost? 

At program  renewal time, the dollars spent to settle those few catastrophic claims makes difference between a significant work comp premium increase, or no premium increase, or premium decrease.  A structured settlement  is one of the most effective tools to use to deal with the cost of high dollar work comp claims. Tort claims use structured settlements all the time since their introduction in the 1970's, but they were slower to catch on in work comp claims.  The work comp community now recognizes the importance of structured settlements and frequently use them to resolve high value claims.

The primary  benefit of using a structured settlement is the elimination of the long-term exposure of the catastrophic work comp claim.   This is accomplished by the insurer or self-insured company purchasing an annuity from a life insurance company on the employee's life, guaranteeing the employee an income stream for a specific period of time, or for life — depending on how the structured settlement is crafted. 
 

Plaintiff attorneys  recognize most of their clients entire work comp settlement is used up within 3 to 5 years. The conscientious attorney works with the workers' compensation adjuster and the structured settlement company to protect the employee from possible spendthrift ways. 

Plus, in those states where the insurer/self-insured is allowed to pay out the awards on a weekly basis, the structured settlement can be customized to pay a lump sum up front.  Thus, the employee receives a small lump sum up front to cover all immediate needs and the plaintiff attorney collects the contingency fee and closes the file.

Potential benefits/selling points to the employee:
1.  More money over time than would be received with a lump sum settlement.
2.  Guaranteed lifetime payments rather than a designated maximum number of weeks in most state statutes.
3.  Flexibility in payments, i.e., payments are customized to meet the individual's life events, such as a lump sum for college tuition or a new car every ten years.
4.  Financial peace of mind.  Removes the worry over future income or managing a large amount of money. 5.  The ability to provide for a spouse with "joint life" payments, not available under worker comp laws.
 

Additional benefits to the employer/self-insured or insurer:
6.  A complete resolution of the worker comp claim. All future cost are transferred to the life insurance company.
7.  A fixed cost for the annuity, eliminating the exposure for continued and/or future medical expenses.
8.  The elimination of volatility in the cost of future medical and future increases in the indemnity rate.

Split-Funding
A recent trend  in some of the most severe cases is "split funding," the creation of two structured settlements.  One structured settlement funds only the income stream for the employee.  The second structured settlement funds the future medical cost eliminating any concerns of the employees about future medical cost, as the life insurance company does the medical cost underwriting and assumes responsibility of the future medical cost.

The best time  for the work comp adjuster to start discussing the possibility of a structured settlement is when it becomes obvious the employee will probably never be able to return to work.  If the adjuster waits until the plaintiff attorney sends a settlement demand to discuss the benefits of a structured settlement, the employee has probably already been told the lump-sum settlement range the plaintiff attorney's hopes to receive.  By directing the discussion toward a structured settlement early on, the adjuster avoids the employee's false hopes about a "winning the lottery" type settlement.

Some plaintiff  attorneys will want to utilize their selection of a structured settlement company.  Such a choice almost always comes up with a higher cost than if you select your own structured settlement broker.  If your insurer does not have its own in-house structured settlement broker, it is definitely recommended you work with your work comp adjuster to select your own structured settlement broker. 

With your  own structured settlement broker, you specify the amount of money you will invest now to eliminate the future cost of the claim.  The structured settlement broker is then in a position to customize the structured settlement to meet the employee's needs and your determination of the settlement value. (workersxzcompxzkit)

While a structured  settlement does not settle all catastrophic workers' comp claims, consider it on all your very large claims as a way to reduce the final cost of the claim to reduce or eliminate future workers' comp premium increases.

Note: there is a commission involved with buying structured settlement. Make sure you know who is receiving the commission and that is in line with the interests of your company.

Author Robert Elliott, executive vice president, Amaxx Risks Solutions, Inc. has worked successfully for 20 years with many industries to reduce Workers' Compensation costs, including airlines, health care, manufacturing, printing/publishing, pharmaceuticals, retail, hospitality and manufacturing. He can be contacted at: Robert_Elliott@ReduceYourWorkersComp.com or 860-553-6604.

Podcast/Webcast: How To Prevent Fraudulent Workers' Compensation Claims Click Here  http://www.workerscompkit.com/gallagher/podcast/Fraudulent_Workers_Compensation_Claims/index.php

We accept articles about WC cost containment. Contact us at: Info@ReduceYourWorkersComp.com.
 
Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker or agent about workers' comp issues.

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

Why do some companies use Structured Settlements when settling large claims?

Structured settlements are a tool to resolve large workers’ compensation claims. When settling a claim the claimant might receive either a lump sum payment (one payment) or a “structured settlement” (payments made over time). Structured settlements are a type of annuity. They are a natural fit with workers’ compensation claims since claimants were already accustomed to receiving weekly payments. Settling a claim with a structured settlement instead of a lump sum payment allows claimants to continue receiving payments on a scheduled basis while also:

· giving them the option to designate a beneficiary,

· to receive benefits tax-free,

· plan for future family expenses such as college and

· allowing some the opportunity to receive more money on a coordinated basis once the structured settlement value was pro-rated over a lifetime.

Structured settlements are a benefit to employers too since the annuities are funded with “present value” rather than “ultimate value”. Thus, employers are able to cap their exposures and close the file with less outlay than if they funded the entire amount up front. Employers with high retentions and self-insured employers have input into which structured settlement company they use. If you select a firm to work with, include that in your Special Handling Instructions.

We appreciate Richard Regna, CSSC, for providing this material. If you’d like additional information, you can post a comment or contact Richard directly at rregna@sfainc.com Structured Financial Associates, Inc. website: www.sfainc.com

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