We’ve all been there – the employer or carrier makes a great settlement offer, but the injured worker (the client) is reluctant to accept. Or worse, the client hastily accepts a suboptimal offer from the employer without thoughtful consideration of their future medical needs and costs. Both situations are frustrating for experienced attorneys who understand the financial benefits or losses at stake.
Settling a workers’ compensation claim allows the injured worker to gain control of their medical treatment and choice of providers. Some are eager for this opportunity, while others hesitate to trade years of support and safety in the system for an uncertain future that they must manage alone. More attorneys are solving these dilemmas with new settlement options that give clients assurance as they transition out of the system – and financial support for the long road ahead. However, few clients know these options exist.
What Does the Client Need?
To provide a recent example, a quadriplegic client was becoming increasingly frustrated with treatment delays and denials in the workers’ compensation system. This adversely affected their health, and the client ended up in the hospital. The system they depended upon was now threatening their life.
It is no surprise that this client wanted out, and control of their medical treatment. They were giving serious consideration to the employer’s present offer – which was half the fair settlement value. The attorney knew this amount would only pay for a few years of medical expenses, at best, and this client would regret their decision later. Fortunately, the attorney consulted us.
A Team Approach
Innovated financial options like market-based structured settlements and trigger trusts are becoming more popular as they provide injured workers with both ongoing support and opportunity after settlement. These options can add value to the attorney’s legal services – as part of a transitional plan – and avoid the abrupt, transactional nature of all-cash settlements.
I joined this case before mediation to explain the purpose of a Medicare Set-Aside (MSA) and how funding the MSA account with cash, and a structured settlement or annuity, can free up money for other needs and still comply with the law that protects Medicare. By structuring the MSA, this client would have approximately $350,000 more to use for non-Medicare and indemnity needs.
The client was relieved to hear this news. They admitted to feeling overwhelmed by the thought of managing their medical care, transportation, household, and trying to invest the money for the rest of their life with no experience. After seeing the value of a structured MSA, they wanted to know what we could do with non-MSA and indemnity funds. We had several meetings with the client to discuss their needs and expenses, then carefully developed a plan to take into mediation.
The Client’s Settlement Plan
Mediation ended with some key contingencies that benefited both the injured worker and the employer. One of these called for Centers for Medicare and Medicaid Services (CMS) approval of prescribed Ketamine treatment, which was a major MSA cost driver. The CMS submission process also gave us extra time to develop a final plan for the proceeds and to interview trustees and other future members of the client’s team. We outlined their immediate needs, required monthly income, long-term needs, and a comfortable amount of funds for emergencies.
We met those needs with a mix of cash, a management trust with special-needs triggers, traditional guaranteed structures, and a market-based structure called Growth Structured Settlement or “GSS”. GSS is offered through Assura Trust and uses an underlying LifeStrategy® Growth Fund from Vanguard. The client liked GSS because of its low fees, built-in diversification of the fund, and extra growth opportunities to help alleviate concerns about inflation in long-term medical expenses.
My office is receiving more requests for GSS in settlement negotiations above $750,000 where more creativity than cash is needed. GSS and other market-based settlement solutions enjoy the same legal protections and tax advantages for injured workers as traditional structures. And GSS is a natural fit for delayed expenses like future surgery or lifetime needs such as attendant care. Future performance of market-based structures is not guaranteed, so traditional structures remain the best option to fund MSAs.
Benefits to the Client and Attorney
Financial concepts are intimidating for many clients. The reason why structured settlements are a natural fit for injured clients is their simplicity. An anticipated amount is paid at a set interval, for an expected duration or lifetime, beginning on the chosen date. This simple arrangement sets clear expectations for the future.
Structured settlements can’t solve every need a client may have now or in the future. In this case, any remaining unknowns were addressed with a settlement management trust. They receive support and protection of a trustee, a professional investment advisor team, and tax accountants. We even included special needs provisions so the client could access needs-based public benefits in the future.
Because the attorney consulted us early, the client was able to take ownership of the settlement planning process, confidently negotiate their needs, and receive more benefits than cash or the system could offer. Serving your clients’ needs gains their confidence in your abilities and your firm. Their trust in you will foster everlasting relationships that turn customers into clients, and clients into referral sources.
Nathan M. Evans, CSSC