Workers Compensation &
Medicare Set-Asides"
Presented by:
Betty Gregware, CSSC – Mutual of Omaha & Toni Warbington, CSSC – EPS Settlements Group
W/C vs. Tortfeasor Liability"
• No provision to bring suit against employer (don’t have to prove liability)
• No need to settle
• Section 130 amended 8/5/97 to assign 104(a)(1) • Each state has laws (statutes) – may prohibit/limit
assignability
• Statutory Benefits
Indemnity (wages) Medicals
W/C Options for Carriers/Employer"
• Pay indemnity each period and pay medicals as incurred
• Fund indemnity with Reinsurance/Annuity and pay medicals as incurred
Products for W/C"
• Reinsurance Agreement (ceding company is the owner – no guarantee fund – 2 & 3 Party Agreements)
• Annuity
Buy and Hold (ceding company owns)
Assignment (transfer ownership to Assignee only allowed if case if filed after 8-5-97)
Non-qualified assignment (transfer ownership to Assignee for claims filed prior to 8-5-97)
Provisions for W/C "
• Cash/Installment refund (front end – some
providers require ceding co to own the annuity with this option)
• Commutation Endorsements/Riders (back end)
To ceding company
To beneficiary of injured party To ceding company
upon elimination of liability remarriage
W/C Indemnity Opportunity"
• Substitution of benefits advantages
Rated age
Cap future obligations (mortality) Transfer payment administration Reserve release Reversionary payment • Compromise Same as substitution Change payments to
meet future needs, lift out of the statute
W/C Medical Opportunity – MMI
has been reached - Compromise"
• Rated age
• Reserve release
• Need to fully consider future medical obligations covered and not covered by Medicare
Request Allocation"
• If the injured party is currently receiving Medicare benefits and the total settlement amount exceeds $25k
OR
• If there is a reasonable expectation that the injured party will receive Medicare benefits
within 30 months of the date of settlement and the total amount of the settlement exceeds
Medical Set Aside Accounts (MSA)"
• Money set aside to pay injury related Medicare allowable expenses (can be self or
professionally administered) • Allocation is prepared
• Centers for Medicare and Medicaid Services (CMS) approves allocation
• MSA established with “seed money”
Obtaining Allocation & CMS
Approval"
• Contact allocation individual or company • Provide information and rated ages
• Receive allocation – future obligations • Provide periodic payment plan
• Upon acceptance, provide draft SA and request allocation to be submitted to CMS
• W/C Board approval can be obtained now or after CMS approval is obtained (need to resolve any
W/C Documentation"
• Application/Reinsurance Agreement
• Substitution/Letter(s) – establish indemnity payments or inform claimant of company who will be making payments in the future required by some states
• SA/Addendum – spread and flex/bridge language important
• Compromise/Order & CMS approval letter (if case submitted to CMS for approval)
• Commutation Rider/Endorsement is provided (if applicable)
Questions?"
THREE LITTLE LETTERS THAT CAN STRIKE FEAR IN YOUR HEARTS…"
M S A
• Just the le)ers “MSA” can cause the strong to become weak and the steadfast to go running for the hills.
• MSA stands for Medicare Set-‐Aside, hopefully the following informaAon will provide you a foundaAon on the topic, which is gray at best.
The Medicare Secondary Payer Act"
In 1980 Congress enacted the Medicare
Secondary Payer (MSP) Statute (42 USC 1395y), giving Medicare rights as “Secondary Payer”.
The regulations prohibit Medicare from making a payment where there is a primary payer
involved.
It will allow Medicare to conditionally pay and get reimbursed later.
The Medicare Secondary Payer Act"
Types of insurance plans deemed primary to Medicare by the statute:
Workers’ Compensation No-Fault Insurance
Automobile Insurance Liability Insurance
MSP Timeline"
1965 – Medicare enacted
1980 - Medicare Secondary Payer (MSP) Statute
1980-2001 – 21 years of inactivity
May 2001 – U.S. Government Accountability
Office (GAO) recommends voluntary/
mandatory reporting process to improve the accuracy of federal benefit payments
July 2001 – CMS issues the “Patel” memo creating
MSP Timeline, continued!
2001 to present – CMS issues more memos further
defining MSA’s.
2003 - Medicare modernization Act Expanded the
MSP;
• Clarified Medicare’s status as a secondary payer;
• Strengthened Medicare’s right to recover conditional pmts
December 2007 – Former President Bush signs the
Medicare, Medicaid and SCHIP Extension Act of 2007.
January 1, 2012 – Effective date of SCHIP Mandatory
Insurance Reporting (MIR) on TPOCs over $100,000 as of June 2012
January 10, 2013 – SMART Act – Section 111
Conditional Payments (made by
Medicare prior to settlement – SMART
Act is changing the time line to obtain)"
• Notice to Medicare - place Coordination of Benefits Contractor (COBC) on notice
• Request undated Conditional Payment Letter in advance of settlement
• Carefully review Conditional Payment Letters
• Determine who will resolve Conditional Payments as part of Settlement
• Final Demand Letter – can only request AFTER settlement
What exactly is an MSA?"
• A Medicare Set Aside (MSA) is an agreement in
which a certain amount of money is allocated and set aside to pay for esAmated future Medicare
covered expenses that are related to the claimant's injury in an account.
• Those funds are “set aside” to be used in the
future. AIer the account funds are exhausted in a given year, then Medicare will kick in and cover the claimant’s medical costs.
What is an Allocation report?"
• A Medicare Set-Aside (MSA) Allocation is a detailed report that recommends how much money out of the settlement needs to be “set aside” to satisfy the Medicare Secondary Payer (MSP) Statute of 1980.
• The MSA allocation will break down all future medical and prescription drug expenses for the life expectancy of the
claimant that would normally be covered and not covered by Medicare. It is based upon an analysis of medical reports from the past several years.
• An MSA Allocation Report is also a 3rd party look at future
WCMSAs (Not Liability) ""
• Current WCMSA review thresholds
• Claimant is current Medicare beneficiary and the total settlement is greater than $25,000
--OR--
• Claimant as a “reasonable expectation” of Medicare entitlement within 30 months of the settlement
date, and the total settlement amount is greater than $250,000
CMS Approval"
• CMS is an acronym for the Centers for Medicare and
Medicaid Services – which is the administrative arm
of Medicare and Medicaid.
• The MSA allocation and amounts can be submitted and reviewed by them, and they will respond on whether
they agree that the amount of money to be set-aside is sufficient.
• They may respond that they don’t agree with the
amount, and will state a different amount of what they feel is sufficient.
After the MSA Allocation is
Completed…."
At this time, CMS is reviewing workers’ compensation cases; and liability MSA allocations (in certain regions) but is not requiring that liability cases to be submitted. Some clients choose to submit liability cases to CMS as an extra measure of protection.
A draft of the Settlement Agreement (unsigned) will be needed if you would like to submit the case to CMS.
The claimant must also sign a CMS release form in order for the case to be submitted to CMS.
The CMS release form also allows the MSA vendor to investigate any Medicare liens.
When to obtain CMS Approval"
• After the MSA Allocation has been prepared and accepted by the Defendant/Insurer and Claimant
• Before W/C Board Approval of the Settlement • After W/C Board Approval of the Settlement
No right or wrong order to resolution – Language is Key!
Administration Type"
• Self Administration of MSA
• Professionally Administered MSA
• Can also obtain – Medical Custodial Account for non-Medicare covered medical expenses
How to run a MSA Quote"
• Provide the plan per the MSA Allocation Report
• Seed Money needed as upfront cash
• Annual Payments for the defined number of years or life time annual benefit (can be run as a temp life quote), all depends on the risk
tolerance of the claim handler • Installment or Cash Refund
What the Future Holds?"
• Determine if Medicare’s interests are involved early on – Every party is responsible
• Has Medicare been correctly placed on notice? • No legal authority has been cited by CMS
• Risk Tolerance of the parties involved is the current key to claim resolution
