While many workers’ compensation industry professionals and regulators focus their time, effort, and resources on claims management, litigation, regulatory initiatives, and the settlement process, many don’t think about what happens after claims settle. When an injured worker settles their case, their life changes dramatically and it can have implications on the many stakeholders involved in the workers’ compensation system.
What Does It Mean to Settle?
If an injured worker chooses to settle his or her workers’ compensation case, most often he or she agrees to release the insurance carrier from its responsibility to pay for future medical expenses in exchange for a sum of money, either a lump sum or an annuity. Should the injured worker accept a settlement offer, they are agreeing to close out the case, forgoing any future lifetime benefits. These funds typically represent the future value of ongoing benefits, and usually the cost of ongoing future medical treatment. It is very important for the injured worker to understand what kind of future medical treatment they will need going forward so that they can ensure the settlement funds are enough to cover future medical care. It’s also important to consider how the settlement could interact with other government benefits they could be receiving, including Medicare, Medicaid, social security, and short-term or long term disability.
This entire process can be confusing and challenging for an injured worker that is unrepresented, and even a complicated life experience for those injured workers represented by attorneys as well. While the workers’ compensation system was meticulously designed to take care of workers injured on the job, there has not been much insight, research, or thought into the daunting experience injured workers may face at or after settlement, once they leave the workers’ compensation system.
The Benefits of Settling
Settlement can be an appealing option to many injured workers. Settling can mean less restrictive treatment, the freedom to see any doctor, provider, or specialist, and use any pharmacy. If they have been having treatments denied through Utilization Review, settlement represents the opportunity to seek the treatment they would like outside of treatment guidelines. Settlement allows injured workers to get the treatment that they want when they want it without potential denials or hoops to jump through to get approvals.
In the workers’ compensation system injured workers are often required to see specific doctors, which could be located miles away. For someone with a significant injury, traveling to and from doctors’ appointments can not only be a challenge, but also exhausting and frustrating. If an injured worker chooses to settle their case, they are able to treat with doctors and providers closer to home and those providers that the injured worker trusts.
Settlement can also represent a fresh start for injured workers. They are able to leave the workers’ compensation system, put their injury behind them, and focus on returning to health. They no longer have to attend independent medical examinations or court dates and can concentrate on healing and getting their lives back on track.
However, settling a workers’ compensation claim ultimately represents a large future responsibility for the injured worker and a life changing event that will have numerous impacts on their lives well after the settlement occurs.
Challenges after Settlement
With settlement comes a new set of challenges for injured workers. The increased freedom often means increased responsibilities, increased risks, and decreased support/resources for the injured worker, which often times can be overwhelming.
Once they choose to settle, injured workers are responsible for managing their own medical care, coordinating treatments, and, if they have a Medicare Set Aside (MSA), complying with the guidelines put forth by the Centers for Medicare and Medicaid Services (CMS). If an injured worker fails to comply with CMS’ guidelines, they risk having their future Medicare benefits denied.
One of the largest challenges injured workers face is adjusting to being on their own. Once an injured worker chooses to settle their case, their adjuster, attorney, support from the regulatory system, and any nurse case manager steps away, as the file is closed and the case is settled. This leaves the injured worker without the resources they once relied on to help them coordinate their care or answer their questions. Many times, this can leave injured workers feeling lost as they have no one to turn to in order to help them navigate an increasingly complicated healthcare system.
Injured workers must also adjust to paying for their own medical treatments once they settle their case. While in the workers’ compensation system, injured workers are able to treat through the carrier/employer, and therefore get access to their volume discount networks for pharmacy, provider, and other medical treatments. Through the workers’ compensation system and vendors that are utilized, carriers/employers pay less than full price on the treatments and prescriptions on behalf of the treating injured worker – these discounts lead to dramatic savings that accrue to the benefit of the carrier/employer and the workers’ compensation system.
Once the injured workers settle their care, they must utilize their settlement funds, yet they do not have access to medical discount networks, and ultimately end up overpaying because they will be charged full retail price for their treatments. This often results in sticker shock for the injured worker who is now spending through his or her settlement funds at a quicker pace than expected. For instance, Celecoxib, an anti-inflammatory, might cost the insurance carrier around $3.82 per pill. Once the injured worker settles, they’ll be paying retail, around $7.58 for the exact same pill. This drastic difference often leaves injured workers confused and scared that their funds will not be enough for their medical treatments for the rest of their lives.
Without any of the support they received in the workers’ compensation system, injured workers also need to manage their own medical care after settlement. This includes setting their own appointments, coordinating transportation, and figuring out all of their prescription pickups. For instance, if an injured worker saw a primary care physician, physical therapist for their hip, a chiropractor for their back, a pain management doctor, and needed to fill four different prescriptions, they could have to coordinate four appointments per month, including any transportation to and from these visits, as well as coordinate the pickup of the prescriptions they are taking. For someone that is already injured and trying to focus on returning to health and moving past their injury, this can be a daunting task that can cause confusion and added stress to their life.
Added Responsibilities with a Medicare Set Aside
If an injured worker settled with a Medicare Set Aside (MSA), which about 45% of total submitted settlements do, they have added responsibilities required of them by the Centers for Medicare and Medicaid Services (CMS) in order to remain compliant and protect their futured Medicare benefits.
These requirements include:
- Deposit the MSA settlement funds into an interest-bearing account
One of the main requirements with an MSA is to deposit the funds into a separate FDIC-insured interest-bearing bank account. Often, injured workers put the funds into their regular checking or savings account, but then it becomes difficult to differentiate which funds were MSA funds, and which were personal. For instance, they might
accidentally pay their phone bill with their MSA funds. When it comes time for end of the year reporting, it can be difficult to determine which transaction was for the MSA versus personal funds.
- Use the funds only on treatments related to the injury
Often, injured workers think they have the ability to spend their MSA funds on anything, including a boat, their child’s college tuition, etc. However, this is not the case. Many injured workers also believe that they can spend the MSA funds on any future medical treatment, however, it must be spent only on future medical treatment related to the initial injury for which they received the settlement funds.
- Use the funds only for Medicare-covered expenses
In addition to the requirements that funds only be used on future medical treatment related to the initial injury, they must be spent on Medicare-covered items. Because the MSA is money set aside specifically for future medical treatment, it must be spent appropriately in a way that protects Medicare’s interests. It can be difficult for the average person to determine if a treatment or prescription is Medicare-covered and related to their initial injury.
Many times it depends on drug codes or treatment codes, including ICD 10, NDC, and CPT codes. For the average person, trying to look up their medication and procedure code can be incredibly confusing. In addition, certain codes are covered, while others are not. For example, Medicare does not approve shower bars, so many people with MSAs assume they cannot use their MSA funds to buy one. However, a “grab bar” has a different HCPCS code, but serves the same function and is Medicare-covered. These nuanced differences can result in someone being out of compliance.
- Pay according to the appropriate state fee schedule
Injured workers with an MSA must also pay according to the appropriate fee schedule. Typically, after injured workers settle, they are paying cash rates, or full price. CMS requires that treatments be paid for at the state fee schedule (if one exists or “usual and customary” if a fee schedule does not exist), meaning injured workers must call and negotiate those rates. Many times, this is an unknown and incredibly difficult process, and is unrealistic for the average person to be able to obtain.
- Prepare and submit annual reporting to CMS and
- Maintain line item detail for the duration of eligibility
Injured workers are also responsible for keeping track of every single expense made with their MSA funds, and sending detailed account of that spending to CMS. For example, CMS asks injured workers to keep track of:
- Transaction date
• Check number (if any, or transaction number if present)
• “Payable to” or health care provide name
• Date of service
• Description of the procedure, service, or item received
• Deposit, interest, or other allowable expense
• Amount paid
• Any deposit amounts
• Account balance
• Every expense/treatment
For the average person, it can be as complicated as filing their taxes. If the injured worker has an annuity and exhausts their funds each year, there are additional depletion and funding reports they must file as well. Adhering to these guidelines, outlined in CMS’ 31- page Self Administration toolkit, is vital for an injured worker, as failure to comply could mean jeopardizing their future Medicare benefits. Medicare will not step in as primary payer until they confirm that the MSA money was appropriately exhausted.
Resources After Settlement
Fortunately, for injured workers, there are some resources available to help them after settlement.
Injured workers can reference the CMS website, and use their search tool to find further information and guides. Injured workers also have access to the 31-page CMS Self-Administration Toolkit, which provide guidelines and examples of reporting.
With the recent WCMSA Reference Guide update, CMS now “highly recommends” the use of a professional administrator to assist in managing settlement funds. Professional administrators offer custodial accounts and will establish a separate fund for the injured worker’s settlement funds. Administrators ensure they remain compliant with CMS’ guidelines, protecting their future Medicare benefits. In addition, professional administrators serve as valuable resources for injured workers after settlement helping them navigate the healthcare maze and providing access to medical networks to help the injured workers better preserve their settlement funds.
There are also self-administration tools available for injured workers that might not want someone else to manage their money fully, but would still like to access savings and support for their future medical care.
For those that may have already exhausted their funds, Social Security can provide helpful information on ways to find more cost-effective solutions so they can continue to get treatment. State workers’ compensation boards often have helpful resources and FAQs for injured workers available on their websites as well.
For injured workers weighing the pros and cons of settlement, it is important to understand fully the responsibilities and requirements after settlement.
Check out the original article in the IAIABC Perspectives Magazine!