Many industry professionals involved in the workers’ compensation industry will focus their time and effort on litigation, settlement procedures, and regulatory initiatives. Claims management is important, but many people don’t think about what happens after the case is settled. When a worker who has been injured on the job settles their case, it can have profound effects on their own life, as well as those involved in the workers’ compensation system.
Settling a Case
If an individual chooses to settle his/her workers’ compensation case, this usually means that they are agreeing to a lump sum or annuity payment. This releases the insurance company from being financially responsible for future medical payments. Some states may require the insurer to continue weekly or monthly paid medical benefits, while others allow insurers to terminate medical benefits upon settlement of a workers’ case. Always be sure to read the terms of a settlement very carefully. If you agree to a lump sum, these funds usually represent the future value of ongoing benefits and usually the cost of future medical treatment related to the injury. It is incredibly important that you and your lawyer calculate and understand the cost of future medical treatments related to your injury. Keep in mind how the settlement could interact with government benefits such as social security, short-term/long-term disability and Medicare/Medicaid. This can be a trying life experience for anyone and can be very confusing and challenging for an injured worker if they are unrepresented.
The Pros and Cons of Settling your Workers’ Comp Case
If an injured worker chooses to settle a workers’ comp case, knowing the possible pros and cons of the decision is necessary. Settlement can be an appealing option for a number of reasons:
· Less restrictive treatment: The freedom to see any doctor or specialist with the money acquired through the settlement may make a workers’ life easier. Often times, doctors that are assigned to a case through the workers’ compensation system can be very far away from your house. This can be exhausting, especially if you have a major, debilitating injury.
· Living life outside the workers’ compensation program: Ending a case can represent a life changing moment. The worker will have a much larger future responsibility, but will also be free from future court dates, required doctor’s visits and state mandated supervision.
· Turning a new leaf: Putting the case behind them, settling the case and focusing on their health can help workers move on with their life. It can represent a fresh start.
Settlements can also be a trying time for an afflicted worker:
· Freedom is a double-edge sword: Once a worker settles a case, they have the freedom to choose their own doctor and health care professionals. However, once the case is settled, changes occur: their adjuster, attorney, support from the system, nurse case manager and other health care professionals must step away. This can leave an injured worker feeling lost, as they may have been relying on the system for an extended period of time.
· Cost of treatment may increase: Employers utilize the workers’ compensation program to receive generous discounts on medical treatment and pharmaceuticals to assist injured workers. This may mean that the cost of medication could increase. Make sure that you take this into account when settling a case. This can leave many workers feeling uncertain about their financial future.
· Added responsibilities with a Medicare Set Aside (MSA): About 45% of total submitted settlements will settle with MSA. This includes added responsibilities required by the Centers for Medicare and Medicaid Services (CMS) in order to remain compliant.
Medicare Set Aside
There are many requirements for an MSA if an injured worker decides to settle a case. These requirements consist of:
1. A new bank account
The CMS requires that all funds received for an MSA must be deposited into a separate FDIC-insured interest-bearing bank account. In the past, many workers would put their funds from the settlement into a regular checking or savings account. It can become difficult to tell the difference between MSA funds and personal funds if a worker does this. A worker may accidentally pay their cable bill with MSA funds, which can complicate end of year reporting and taxes.
2. Funds for Medicare-covered expenses only
Since MSA is money set aside specifically for future medical treatment on Medicare-covered items, it must be spent in a way that protects Medicare’s interest. Sometimes drug codes and treatment codes can be confusing and this confusion can result in someone falling out of compliance. Know the drug codes and take measures to be compliant.
3. A new schedule
Injured workers that have an MSA typically pay full price. CMS requires that treatments be paid at a state fee schedule, meaning an incredibly difficult and and unknown process usually awaits them. Injured workers with an MSA are also required to keep track of every single expense made with their MSA funds. Every detail must be recorded and sent to the CMS for inspection. This can be as complicated as filing taxes, as there are funding report guidelines and additional depletion reports to file if a worker exhausts their funds each year.
Settling your Workers’ Compensation Case: Resources after the Fact
If an injured worker feels lost after settling their case, there are some resources that are available to help assist in the process. Accessing the CMS website can grant a worker a plethora of information, including a 31-page CMS Self-Administration Toolkit. This provides the guidelines and examples that are needed to successfully report MSA funds. CMS highly recommends a personal administrator to assist in managing and reporting MSA funds if a worker decides to settle.
Weighing the pros and cons of a settlement can be incredibly confusing and conflicting for an injured worker. It is necessary to fully and completely understand what it means to settle a case before a worker decided to settle theirs.