Settling workers’ compensation claims is — or should be — a major goal for payers and employers. Ideally, you want the injured worker to return to function and, if possible, work. At the very least, both you and the injured worker want out of the workers’ compensation system — the worker so he can move on with his life, and the payer/employer to get the claim off the books.
The Key to Successful Settlement is Starting Early
The key to successful settlement is starting early in the claim history. However, all too often there are claims that sit on the books for years, adding up to devastation for the injured worker and significant costs for the payer/employer. Settling claims can be fraught with uncertainty and peril — unless you work with the right experts. While it’s impossible to find one person or even one company with expertise in all facets of settlements, there are experienced organizations that specialize in one area of settlements and have wide-reaching connections with authorities in other relevant areas.
What is a Settlement Consultant?
A settlement consultant is a settlement expert with knowledge and access to various settlement tools to address the most challenging workers’ compensation claim issues. These experts can be brought into the process early on, so the settlement is set up appropriately.
Rather than just running quotes, the settlement consultant should act as the general contractor in identifying, bringing and managing the best experts to the table to address the issues preventing a positive outcome for all parties in the case.
Whole Person Approach
Industry stakeholders are increasingly seeing better outcomes when they treat the injured worker holistically, rather than focusing only on the specific injury/illness. Ignoring issues such as comorbidities and psychosocial factors only prolong claims and end up costing more.
In the same way, injured workers who are settling their claims must be viewed in their entirety, since each person is unique. That means in addition to taking care of the person’s ongoing and future medical needs, other aspects of his wellbeing and life must be taken into account in order to have a successful settlement. A whole case approach is ultimately a win-win for everyone.
The amount of the settlement and how it will be distributed must be based on a variety of factors — not just the person’s injury. For example, some issues that may need attention are:
- Retirement
- Children with current or future educational needs
- Legal concerns
- Government benefits
- Tax consequences
- Insurance
- Lien resolution
Uncovering the injured worker’s needs and desires should form the basis of the type of settlement and how the money will be distributed and overseen. The distribution of settlements can be done either by:
- Lump sum, in which the entire amount is given to the injured worker; OR
- Structured settlement, where the person gets money doled out in a variety of ways over a period of time.
The majority of injured workers, as well as others presented with the choice of collecting a significant amount of money, opt for the lump sum. Unfortunately, many of them end up running out of money way too early. In the case of an injured worker, that can present a slew of problems.
- Many injured workers who settle their claims have at least some of the money included in a Medicare Set-aside to ensure Medicare does not pay for medical care that should instead be paid through workers’ compensation. Determining whether and how an MSA should be created is highly complex and can be a nightmare for those without specific expertise in the area.
The Centers for Medicare and Medicaid Services (CMS) has specific reporting requirements for MSAs. Among them are:
- The money must be deposited into an interest-bearing account
- The funds must only be used for treatments related to the specific injury — not other medical issues
- The money can only be used for Medicare-covered expenses
- Payment must be made according to the appropriate fee schedule
- Each year, the injured worker must prepare and submit an annual accounting report to CMS
- A line item detail must be maintained for the duration of eligibility
Since failure to comply puts the injured worker at risk of being denied Medicare benefits, it’s crucial that an expert in managing MSA funds is involved.
- Other Benefits. Medicare is not the only government benefit program that could be impacted by a settlement. Medicaid and Supplemental Security Income (SSI) benefits can also be affected since settlements give the person additional assets. Injured workers who are receiving these benefits must be made aware of how a settlement could make them ineligible for these and other public benefits.
Special Needs Trusts were created by Congress for this very purpose. Some of the proceeds from the settlement can be placed in these vehicles to preserve and even extend the purchasing power of the settlement. Again, these are very complex and must be developed in conjunction with someone who has the expertise in state and federal statutes, public benefits and tax law.
- Durable Medical Equipment. In addition to the injured worker’s medical needs, he may need special equipment or even alterations to his home and vehicle. An expert on durable medical equipment (DME) should be involved in the settlement process to provide expertise on when, where and how much money will be needed.
- Family needs. In addition to the injured worker’s ongoing medical needs are those of his family. Children may eventually need money for a car and/or higher education. Parties to the settlement should understand this ahead of time to ensure it is structured in a way that will make these funds available when needed.
Engaging a Settlement Consultant
The best and more efficient time to engage a settlement consultant is before a claim has occurred. The consultant should be a part of your team and ready to assist as needed. When a claim comes across your desk and you say “ugh,” reach out to your settlement consultant and ask “what do you think?”
For legacy claims, find a block of with high reserves that seem to be going nowhere. Providing the name of the case, the adjuster, the claims liaison, attorneys, employer, TPA and a brief synopsis to the settlement consultant starts the ball rolling. With permission, the consultant can reach out to the various parties, gather information and report back as to which claims make sense for settling, as well as which cases do not and why.
Conclusion
Settling workers’ compensation claims should not be just about doling out a sum of money to an injured worker. An appropriate settlement starts with a settlement consultant early in the claim who builds a relationship with the injured worker and uncovers his needs, then brings in experts he knows who will be valuable contributors to the entire process. Working as a team with the injured worker creates a win-win for all parties.
Contact: mstack@reduceyourworkerscomp.com.
Workers’ Comp Roundup Blog: https://blog.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, attorney, or qualified professional.
