Beyond Structured Settlements

SSP 2012 Annual Meeting - 2

Charles Schell, incoming President of the Society of Settlement Planners (SSP), concluded the SSP 2012 Annual Meeting by communicating his thoughts for improving the settlement planning market and expanding its core structured settlement annuity product. In his remarks, Schell addressed alternative business models and challenged participants in both models to collaborate to improve business standards and practices.

What follows is a summary of Schell's SSP comments.

Alternative business models

"Structure brokers under the traditional Claims Management model have the advantage of access to claims adjusters. However, their single-product sale is frequently dismissed by injury victims and their families for many reasons including low interest rates, lack of liquidity and the defense brokers' ties to the defendant. As a result, many injury victims and their families make uninformed decisions or resent the limited financial options presented at the time of settlement.

"In contrast, injury victims and their families generally welcome Settlement Planners into their homes as trusted advisers because they are recommended by plaintiffs' attorneys. By introducing a menu of insurance and financial products and providers, Settlement Planners promote education and information sharing. They encourage the injury victim and his/her family to actively participate in the planning process. From my personal experience, more information equals more structured settlement annuities because the product is generally right in every case at some level of participation as one asset class.

"The Claims Management model benefits the settlement planning industry and Settlement Planners should acknowledge the benefits which include product marketing and continued protection of IRC sections 104(a)(2) and 130. Concurrently, defense brokers should recognize the benefits of collaborating, rather than competing, with Settlement Planners. These benefits include access to and trust of the customer, an awareness of financial needs and family issues plus multi-product financial solutions that feature structured settlements and enhance their sale.

Business standards and practices

"To grow the structured settlement market, both Settlement Planners and traditional Claim Management structured settlement practitioners must improve their business standards and practices. To do so, we must understand, embrace and promote full disclosure, product suitability standards and written, informed consent. Our disclosure practices should include compensation and conflicts of interest. Our product suitability standards should satisfy a fiduciary and/or "best interest" test. We should insist that our customers understand, and acknowledge their understanding of, our proposed products and settlement plans by signing a written informed consent form.

"Rather than complain about secondary market business practices, primary market stakeholders should take direct actions to improve the secondary market. First, by adopting our own "best interest" or fiduciary suitability standards, the primary structured settlement market can improve settlement planning. The result will be fewer cases that are "over-structured" and subsequently require structured settlement recipients to sell payment rights to obtain needed liquidity.

"Second, we can improve the secondary market by promoting one simple, best practice from the primary market - multiple quotes. Unfortunately, single quote transfers remain a common practice within the structured settlement secondary market resulting in unnecessarily high discount rates. By educating and encouraging judges to require multiple quotes as a necessary condition for meeting the "best interest" test, the primary market can help produce an important and immediate secondary market improvement.

"To summarize: my proposed strategy to improve and grow both the structured settlement and settlement planning markets:

• "Study and improve our business standards and practices.
• "Develop "customer centric" solutions that help injury victims.
• "Build collaborative business models by focusing on shared interests."

Acknowledgement: In addition to serving as SSP's President, Charles Schell is a founding partner of Forge Consulting. Forge is also an owner of The Settlement Service Group (TSSG) for which Patrick Hindert, S2KM's blog author, serves as Managing Director.

For additional S2KM reporting about the Society of Settlement Planners, see the structured settlement wiki.

Forge Consulting Reorganizes

Forge Consulting has named Spooner Phillips Chief Executive Officer and announced that John T. Bair, a founder and former CEO of Forge, is no longer associated with the company as the result of a recently completed buyout. A joint written announcement issued by Phillips and Bair, indicates that Bair has formed a new structured settlement agency called Milestone LLC.

Forge, a "plaintiff exclusive" settlement planning company whose products include structured settlement annuities, was founded in 2003 by Phillips, Bair and Charles Schell. Schell and Cory Phillips will continue with Spooner Phillips as Forge partners.

"This is a time of tremendous growth and potential for Forge, as well as the settlement planning industry at large", Spooner Phillips stated in separate comments. "We are certain this change will allow Forge to continue to prosper through our increasing commitment to plaintiffs, attorneys and the advocate associations that bring all of us together."

Phillips added: "Forge maintains its capacity to serve the needs of plaintiffs and their attorneys nationwide. All of our ancillary products and services remain in place. They are fully available to both our existing clients and our anticipated new clients."

Disclaimer: Patrick Hindert, author and publisher of "Beyond Structured Settlements" also serves as Managing Director of The Settlement Services Group (TSSG) of which Forge Consulting is a shareholder.

MSAs and Liability Cases - 2

A prior S2KM blog post ("MSAs and Liability Cases") highlighted a challenging settlement planning priority: although no statutory or regulatory authority requires Medicare set-aside arrangements (MSAs) in third party liability settlements, confusion continues as to whether and when MSAs are necessary and/or appropriate for such cases.

In that earlier post, S2KM summarized recent recommendations for MSAs in liability cases issued by the National Academy of Elder Law Attorneys (NAELA) and the American Bar Association (ABA) respectively for special need attorneys (case specific) and the United States Congress (legislative).

A new article written by Peter Wayne offers advice to plaintiff attorneys about Medicare compliance in liability cases in the context of this statutory and regulatory uncertainty. Titled "Medicare Update: Information to Help with the Darkness of Medicare Compliance", Wayne's article was recently published in both the 2011 Winter Edition of the Arkansas Trial Lawyers Association's Docket and the NAELA Special Needs Law Section's Spring Newsletter.

While advising plaintiff attorneys, Wayne is sympathetic for defendants and liability insurers whom he characterizes as "hyper sensitive" to Medicare issues for two primary reasons:

• Dissemination of bad Medicare advice by attorneys, consultants and product providers who are positioned to benefit financially from uncertainty; and
• Continued extension by CMS of its enforcement deadline for liability claim reporting under the Medicare, Medicaid and SCHIP Extension Act of 2007 (MMSEA) now re-scheduled to begin the first quarter of 2012.

Wayne's article explains and differentiates current Medicare liability case compliance requirements for:

• "Conditional payments" (amounts paid by Medicare for injury related medical care between the time of injury and settlement) where several parties, including plaintiffs and defendants, run the risk of liability for failing to properly protect Medicare’s interest; and
• "Future interests" (using, for example, an MSA) where the plaintiff and plaintiff’s attorney are responsible, but not the defendant or its insurer.

Conditional Payments - Summary of Wayne's advice for plaintiff attorneys:

• Notify the Medicare Coordinator of Benefits Contractor (“COBC”) of the cause of action.
• Then COBC will assign the case to the Medicare Secondary Payer Recovery Contractor (“MSPRC”).
• Provide the required information along with a signed retainer agreement or proof of representation form.
• Then MSPRC will send the attorney a conditional payment summary within 60-90 days.
• Medicare will send a final demand once the MSPRC is notified of the final settlement and provided with the final settlement detail.
• Pay the final Medicare demand within 60 days of receipt in order to avoid incurring interest and penalties.

Wayne's article also highlights H.R. 4796, the Medicare Secondary Payer Enhancement Act, which proposes these improvements for conditional payments:

• Three year statute of limitations for Medicare to recover their conditional payments;
• Primary payer right of appeal;
• Eliminating the use of private information for MMSEA compliance;
• $5000 minimum threshold for all Medicare Secondary Payer (MSP) claims;
• Changing the MMSEA penalty provision from mandatory to discretionary;
• Simplifying the conditional payment process.

Future Interests - Summary of Wayne's advice for plaintiff attorneys:

• Unlike conditional payments, the obligation to satisfy Medicare’s future interests is solely the responsibility of the plaintiff and plaintiff’s attorney.
• CMS has not offered any definitive statements about whether MSAs are needed to account for future medical expenses in liability settlements.
• In workers compensation settlements, MSAs are simply CMS’ preferred methodology for protecting Medicare’s future interest and are not required by law.
• Section 111 of the MMSEA addresses reporting requirements and does not address or require MSAs.
• Circumstances where a plaintiff attorney should consider establishing an MSA or obtaining an objective third party opinion for a liability settlement:
  • If the liability settlement will create a permanent shift of the burden for paying for the Medicare beneficiary’s future injury‐related medical expenses from the liability insurance policy or plan to Medicare; and
  • The liability settlement provides a definitive allocation of settlement money to the plaintiff’s future injury‐related medical care.

For additional information about Medicare and structured settlements, see Section 15.03 of "Structured Settlements and Periodic Payment Judgments".

Structured Settlements in 2009 - 2

This S2KM post follows "Structured Settlements in 2009 - 1" and features topical links to S2KM 2009 blog reports.

For 2010 industry updates, please continue to visit S2KM's blog as well as S2KM's structured settlement wiki.

Prior S2KM annual industry reports:

• Structured settlements in 2008
• Structured settlements in 2007
• Structured settlements in 2006

Professional Association Meetings

• NSSTA - National Structured Settlement Trade Association
  • Winter meeting
  • Annual meeting
  • Fall meeting
• SSP - Society of Settlement Planners
  • Preview
  • Annual meeting
• NASP - National Association of Settlement Purchasers
  • Part 1
  • Part 2
  • Part 3
• ASNP - Academy of Special Needs Planners
  • Annual meeting
  • Tim Nay interview

Settlement Consulting

• Part 1
• Part 2
• Part 3
• Part 4

Spencer v. Hartford

• Report 1
• Report 2
• Report 3
• Report 4

IRC 468B Qualified Settlement Funds

• Single Claimant 468B QSF Update
• IRC 468B and 5891
• Robert Wood's QSF Book
  • Summary and Review
  • Robert Wood Interview
• Jeremy Babener's QSF Paper
  • Summary
    
  • Review
    • Part 1
    • Part 2
  • Jeremy Babener Interview
• US Treasury Priority Guidance Plan 2009-2010

Dissipation Studies

• Introduction
• Jeremy Babener's Dissipation Paper
  • Summary and Review
  • Jeremy Babener Interview
  • Jeremy Babener Responds

Structured Settlement Credo

• Part 1
• Part 2
• Part 3
• Part 4
• Part 5

Rapid Settlements

• Pacific Life v. Rapid Settlements
• Allstate v. Rapid Settlements

Fresno County Factoring Cases

• Report 1
• Report 2
• Report 3

Additional S2KM Analysis

• Re-Thinking Structured Settlements
• Structured Settlement 2009 Mid-Year Update
• Structured Settlement 2009 Strategic Analysis
• Structured Settlements and Government Benefits
• Settlement Trust Due Diligence

Additional Primary Market Developments

• Forge Purchases TSSG
• Richard Halpern

Additional Secondary Market Developments

• S&P Withdraws JG Wentworth Credit Ratings
• Structured Settlement Securitizations

"Structured Settlements and Periodic Payment Judgments"

• S2P2J Release 45
• S2P2J Release 46

Forge Purchases The Settlement Services Group

Attorney Matthew Garretson has announced the sale of his structured settlement agency, The Settlement Services Group, (“TSSG”) to Forge Consulting (“Forge”) a leading plaintiff-exclusive, national settlement consulting company. Garretson said the timing was right for him to focus exclusively on the core lien/claims administrative services of the Garretson Firm Resolution Group Inc. (“GFRG”). Several former TSSG employees will join Forge including former Director of TSSG, Steve Komrska, and attorney Peter Wayne, as legal counsel.

In a related announcement, Forge named Patrick Hindert (Managing Director) and Timothy Morbach (Director of Sales) as TSSG's new executive directors. Hindert will continue to serve as Managing Director of S2KM Limited. Morbach previously worked as Vice President-Investments at UBS Financial Services Inc.

In exclusive interviews with S2KM, Garretson, Forge Principal Charles Schell and Morbach summarized the TSSG sale and re-organization:

Garretson: "TSSG and Forge now have one of the most innovative and comprehensive lineups of financial services available in the personal injury field for both single event and mass tort settlements. The sale of TSSG to Forge, however, will have no impact on the Garretson Firm and its services. The Garretson Firm will continue to serve its clients with superior lien resolution, claims administration, bankruptcy and probate coordination, settlement allocations, Medicare Set-Aside analysis, and Qualified Settlement Fund services".

Schell: “TSSG and Forge have a longstanding cooperative relationship on numerous single event and mass tort cases. Both companies share a common goal of serving the settlement community as well as mutual respect as two of the country's leading settlement planning firms.

"With leadership from Pat Hindert and Tim Morbach, TSSG will operate autonomously as an independent firm with a claimant/plaintiff centric message. TSSG will provide all stakeholders access to “the power of structure” unencumbered by historic structured settlement business practices.

"TSSG will facilitate comprehensive solutions featuring structured settlements and incorporating other government benefits. TSSG will improve structured settlement performance and enhance the role of structured settlements within the larger settlement services industry Matt Garretson and Forge have helped to define. TSSG will improve and grow the structured settlement market with this broader independent message."

Morbach: “Pat Hindert and I are excited for the opportunity to work together at TSSG. Our Mission is to develop the leading structured settlement business model based upon Matt Garretson's structured settlement legacy and complementary with Forge's plaintiff-centric commitment. TSSG's business model will meet standards in the wider financial services industry where product providers and their agents must 'know their customer' and meet "best interest" tests.

"Pat and I view structured settlements as a core settlement service product. From an investment and financial planning perspective, structured settlement annuities represent a strategic asset class within the settlement services and special needs markets. We see many opportunities to improve and grow structured settlements."

TSSG will be based in Cincinnati, Ohio with initial offices in Cincinnati and Northville, MI. For further inquiries, please contact TSSG Managing Director, Patrick Hindert, at (513) 899-2100 or pjhindert@tssg.net.