Beyond Structured Settlements

SSP 2013 Annual Meeting

Since it was founded in 2001, the Society of Settlement Planners (SSP) has defined itself as an alternative to the National Structured Settlement Trade Association (NSSTA); and defined its membership as more than plaintiff structured settlement brokers. The resulting settlement planning business model features:

• Structured settlement annuities as a core funding product, but not as a singular funding vehicle or product, for personal injury settlement plans; and
• Settlement planners, as "claimant centric", multi-professional, advisers who collaborate as a team and offer injury victims and plaintiff attorneys complementary knowledge, skill sets and work product.

To support and expand this settlement planning business model, SSP has developed and promoted:

• Standards of Professional Conduct for Settlement Planners;
• The Registry of Settlement Planners certification program; and
• Annual educational conferences.

To improve and grow both the structured settlement and settlement planning markets, SSP President Charles Schell has proposed the following strategy:

• "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."

SSP recently announced the agenda for its 2013 Educational Conference which will take place May 5-7 in Las Vegas. Featured topics and speakers, organized by S2KM-suggested categories:

Motivation, Marketing and Perspective

• The Art of Significance - Dan Clark
• Overcoming Objections and Managing Opportunities - Frank Maguire
• Life Lessons from the Lottery - Don McNay

Affordable Care Act (ACA)

• Impact on Personal Injury Settlements, Structured Settlements and Special Needs Trusts - Thomas Begley
• ACA Panel - Thomas Begley; Pi-Yi Mayo; Karen Meyers

 Qualified Settlement Funds

• Update - Pi-Yi Mayo
• Panel - Pi-Yi Mayo; Don McNay; Andy Cook; Mark Wahlstrom.

 Settlement Planning Team

• Partnering with Ancillary Service Providers - Anthony Prieto; Dave Place
• Professional MSA Administration - Don Batchelor
• Tax issues - Jeremy Babener
• Partnering with Investment Professionals - Victor Wilkerson
• Working with Benefit Expert Attorneys - Peter Wayne

 Government Benefit Issues

• MSA Allocation Process - Michael Greco
• Social Security Disability Benefits - Omar Ortega and Kip Daniels
• Spend Downs - Kristen Behrens; Thomas Begley
• How to Fix the MSA Program - Doug Shaw

 Settlement Trusts

• Settlement Trusts - Karen Meyers
• Funeral Trusts - Scott Leonardi
• Pooled Trusts - Jason Lazarus

Settlement Planning Products

• Long-term Care Insurance - John Darer
• Guaranteed Index Annuities - David Salko and John O'Connell
• Defined Benefit Plans for Plaintiff Attorneys - Rosendo Zepeda, Jr.

 Related S2KM Resources:

• Spring 2013 Educational Conferences
• SSP 2012 Annual Meeting
• Settlement Planning in 2012
• Alternative Business Models
• ASNP 2013 Annual Meeting

CMS WCMSA Reference Guide - 2

The Centers for Medicare and Medicaid Services (CMS) published an 88-page WCMSA Reference Guide (WCRG) on its website  March 29,2013. Its intended purpose: to help WCMSA professionals, beneficiaries and other stakeholders "understand CMS' [WCMSA] amount approval process and to serve as a reference for those electing to submit such proposals to CMS for approval."

A prior S2KM blog post highlights selected excerpts from the WCRG addressing and summarizing non-structured settlement specific issues. This blog post identifies and discusses structured settlement issues, including rated age information requirements for determining WCMSA beneficiary life expectancy, featured in the WCRG.

Arguably, the most important WCRG statement for structured settlements is the following comment about CMS WCMSA policy memorandums which appears in WCRG Appendix 4 - WCRC Proposal Review Reference Tools: "CMS has issued policy memorandums since 2001 on a variety of topics related to WCMSAs, such as review thresholds, pricing of services and prescription drugs, rated ages, life expectancy, and more. "The WCRG follows all CMS policy memorandums currently in effect. The memorandums are published on the CMS website."

Why is this statement so important for structured settlements?

• First, because one of the policy memorandums (dated: October 15, 2004) includes the following questions and answer:
  • "Q4. Inflation Adjustment/Discount for Present Value/Change in Policy - Must the WC Medicare Set-aside Arrangement include an upward adjustment for inflation? May the WC Medicare Set-aside Arrangement include a downward adjustment as a discount for the present-day value of the total WC Medicare Set-aside Arrangement?"
  • "A4. Effective with the issuance of this memorandum, CMS's position is that the WC Medicare Set-aside Arrangement does not need to be indexed for inflation and may not be discounted to present-day value."
• Second, as a result of this CMS policy:
  • Structured settlement annuities have had an inherent cost advantage over lump sum alternatives for funding WCMSAs; and
  • Structured settlement annuities have underfunded WCMSAs, because they do not include any inflationary component, with Medicare ultimately responsible for the underfunded amount.
• For a simplified example, assume the projected WCMSA payments are $10,000 per year for 10 years.
  • Lump sum - Without any inflation index or discounting, the lump sum present value will be $100,000 which will be invested in an interest-bearing account.
  • Structured settlement - Ignoring "seed money" (see below), the cost of a certain only annuity to fund $10,000 per year for 10 years (even with today's low interest rates) is approximately $94,000 - which is $6,000 less than the lum sum present value because the annuity incorporates a discount rate. Without inflationary increases (which CMS' October 15, 2004 policy memorandum does not require), however, the annuity payments of $10,000 per year will not keep pace with future increases in medical costs. Note also: other types of annuities (eg. temporary life) could cost less than a certain only annuity.
  • Medicare responsibility - If the $10,000 per year proves insufficient, Medicare will make up the difference (see below) and once the WCMSA is fully paid out, Medicare becomes responsible for any further Medicare-related medical expenses.
• Third, the WCRG does not address the inflation-discount issue. The Glossary in Appendix 4 defines "present-day value" as "the cost to fund a WCMSA annuity". Therefore, it appears the October 15, 2004 CMS WCMSA policy memorandum remains in effect and that annuities will continue to represent a lower-cost funding alternative than lump sums for many, if not most, WCMSAs.
• Bottom line: during this era of low interest rates and declining structured settlement sales, WCMSAs have represented, and apparently continue to represent, a singular sub-market where structured settlements enjoy an inherent cost advantage compared with lump sums. The new CMS WCRC appears to maintain that cost advantage by re-affirming the applicability of the October 15, 2004 policy memorandum.

The WCRG further underscores the continuing importance of structured settlements for WCMSAs by the considerable attention structured settlements receive in the in the following sections:

• Section 5.0 - WCMSAs Can Be Funded in Two Ways: a Lump Sum or Structured Payments
• Section 5.2 - Structured WCMSAs
• Section 10.1.1 - Cover Letter - E. Settlement Details
• Section 10.1.3 - Rated Age Information or Life Expectancy
• Section 19.3 -Structured WCMSA Topics
  • 19.3.1 - Funds Left Over / Carried Forward
  • 19.3.2 - Funds Used in a Given Period
• Appendix 3 - Glossary - entry for "structured settlement"
• Appendix 5:15 -Rated Age Information or Life Expectancy - includes sample:
  • Rated Age Statement
  • Annuity Provider Underwriting Assessment
  • Annuity Broker Statement
• Appendix 5: 25 -Settlement Agreement or Proposed or Court Order
  • Includes annuity payout

What follows are non-sequential S2KM comments about selected structured settlement issues addressed in the WCRG. Quotes are excerpted from the WCRG.

Definition - The WCRG Glossary defines "structured settlement" as "[a] settlement in which the agreed-on funds are paid from an initial deposit and subsequent deposits on a regular basis for a given amount of time." Although other sections of the WCRG discuss annuities in the context of structured settlements, this definition fails to mention annuities. In addition, there is no specific link in the WCRG to either structured settlement tax law generally or the tax definition for “structured settlement” in IRC 5891(c)(1) more specifically.

WCMSA cover letter - When a WCMSA is funded with a structured settlement, the cover letter seeking CMS approval must identify the following:

• Name of the carrier
• Cost of the annuity
• Proposed initial deposit (seed money)
• Minimum annual deposit for the balance of the claimant’s life
• Annuity starting date
• Length of annuity
• Annual payout of annuity
• Annual funding date

Settlement amount - "Medicare determines the value of the annuity based on how much the annuity is expected to pay over the life of the settlement, not on the Present Day Value (PDV) or cost of funding that annuity." The WCRG includes an example calculation and requires submission of annuity rate sheets to support calculations of settlement amounts.

Initial deposit - If a WCMSA is funded with structured settlement, the WCRG requires an initial deposit "to cover the first surgical procedure or replacement and two years of annual payments" and provides an example to illustrate how to calculate this seed money. The WCMSA cover letter must disclose whether any portion of the projected prescription drug expenses has been included in the initial deposit.

Scheduled periodic payments - With a structured settlement, the initial deposit is followed by subsequent annual payments to the WCMSA account (or a shorter time period if CMS agrees), to cover projected expenses for a fixed number of future years on the anniversary of the first deposit. It is significant that the CMS WCRG requires annuities with fixed numbers of future years despite allowing/encouraging the use of rated ages to determine reduced life expectancies.

Over-and-under funding - If structured settlement deposit for a given year is not used up, the remaining amount is carried forward to the next payment period. Medicare's threshold to begin paying claims in any subsequent period would then be increased by the amount of the carry-forward. Alternatively, if a WCMSA fund is appropriately exhausted (including roll-over amounts) in a given time period, Medicare will become the primary payer for the remainder of that period assuming CMS receives proper verification. The WCRG includes an example to help explain this over-and-under funding process. When the entire WCMSA fund is exhausted, including all future structured settlement payments, Medicare will pay primary for any future WC-related medical expenses. Obviously, any such over-and-under funding requires additional work for both CMS and the WCMSA administrator compared with lump sum funding.

Rated age information

The WCRG Glossary does not provide any definition for "rated age". Generally the terms "rated age" and/or "substandard age rating" refer to an annuity provider's determination that an annuitant's life expectancy is less than normal. A rated age generally results in a lower premium for life contingent annuities compared with an annuitant having a normal life expectancy. CMS, however, utilizes rated age information from annuity providers ("insurance companies") to determine the fixed number of years for which a WCMSA must be funded.

If rated age information is not provided, CMS will determine a claimant's life expectancy using the actual age. If, however, rated age information is submitted with a WCMSA for CMS approval, CMS requires the following:

• "Rated age confirmation with original proposal documents as outlined in current procedure memorandums. CMS will not accept any variation or substitute wording.
• "A stand-alone statement indicating that all rated ages obtained on the claimant are included.
• "Each rated age is presented on company letterhead for each insurance company (or companies) that made the rating and for each settlement broker that obtained them from the insurance company. Note: Letterhead includes the name and address of the insurance company or settlement broker.
• "All rated age sources shall be independent, in fact and appearance, of the submitter, carrier, and claimant.
• "If more than one rated age is submitted, CMS will use the median of all rated ages submitted.
• "When multiple rated ages are provided, the submitter becomes subject to enforcement of the requirement to use the median rated age and must provide all rated ages to CMS.
• "All rated ages shall be accompanied by a written justification on how such age was determined. For example, if a rated age obtained from life insurance companies for like injuries/illnesses is the method of evaluation, include documentation to support the life expectancy. CMS will project the cost of the claimant’s future treatment over the claimant’s life expectancy, using the Centers for Disease Control (CDC) Tables unless documentation from a medical professional provides justification for an alternative projection.
• "CMS uses the Centers for Disease Control (CDC) Life Tables for WCMSA life expectancy calculations. Please see the WCMSA site for information on the latest tables to use.
• "Do not include the following:
  • "Actuarial charts or life expectancy charts from the CDC or elsewhere, or statements that there are no rated ages.
  • "Do not include any documents on rated ages that contain redacted data. They will not be considered."

Submitting rated age information for CMS approval requires significant additional work compared with a typical structured settlement. The benefit of obtaining a rated age is a shorter WCMSA payout period resulting in a lower cost of funding whether the funding is lump sum or structured.

For additional S2KM reporting about government benefit issues, see the structured settlement wiki. For analysis of the interaction of structured settlements and government benefits, see Chapter 15 of "Structured Settlements and Periodic Payment Judgments" (S2P2J).

CMS WCMSA Reference Guide - 1

Thirty-three years following enactment of the Medicare Secondary Payer (MSP) Act and 12 years after the Centers for Medicare and Medicaid Services (CMS) issued its first workers compensation Medicare set-aside (WCMSA) memorandum, CMS has finally published a WCMSA Reference Guide (WCRG).

Enacted in 1980, the MSP Act requires certain insurers, including liability, automobile, no-fault and workers compensation insurers, to make payment first for services to Medicare beneficiaries regarding claimed injuries, with Medicare responsible only as a “secondary payer.”

CMS, the agency responsible for administering Medicare policies, failed to take practical steps to enforce the MSP rules until 2001 when it issued the first of several policy memorandums addressing WCMSAs. These policy memorandums created a format, checklists and procedures for seeking approval for WCMSAs to "protect Medicare's interests" when workers compensation cases are settled. The WCRG states: "The WCRG follows all CMS policy memorandums currently in effect. The memorandums are published on the CMS website."

Although CMS and its field offices have also issued informal guidance about the use of MSAs in liability cases, nothing comparable exists to the CMS WCMSA memoranda. As a result, there is no uniform position or consensus among tort practitioners as to whether and when MSAs are required in liability cases.

The WCRG continues a series of Medicare legislative and regulatory compliance initiatives which also include the Medicare, Medicaid and SHIP Extension Act (MMSEA) and the Strengthening Medicare and Repaying Taxpayers Act (SMART Act).

Published by CMS on March 29, 2013, the 88-page WCRG (including Appendices) applies only to workers compensation cases. Its intended purpose: to help WCMSA professionals, beneficiaries and other stakeholders "understand CMS' [WCMSA] amount approval process and to serve as a reference for those electing to submit such proposals to CMS for approval."

This blog post provides excerpts from the WCRG addressing and summarizing non-structured settlement specific issues. For a more complete understanding, read the entire 88-page WCRG. Subsequent S2KM blog posts will summarize and discuss WCRG structured settlement issues including rated age information requirements for determining WCMSA beneficiary life expectancy.

Overview

• Medicare's interests:
  • "Any claimant who receives a WC settlement, judgment,or award that includes an amount for future medical expenses must take Medicare’s interest with respect to future medicals into account."
  • "If Medicare’s interests are not considered, CMS has a priority right of recovery against any entity that received a portion of a third party payment either directly or indirectly."
  • "Medicare may also refuse to pay for future medical expenses related to the WC injury until the entire settlement is exhausted."
• Compromises: "CMS does not compromise or reduce future medical expenses related to a WC injury."
• WCMSA statutes and regulations: "There are no statutory or regulatory provisions requiring that you submit a WCMSA amount proposal to CMS for review."
• What are WCMSAs: "A WCMSA allocates a portion of the WC settlement for all future work-injury-related medical expenses that are covered and otherwise reimbursable by Medicare. When a proposed WCMSA amount is submitted to CMSfor review and the individual or beneficiary obtains CMS’approval, the CMS-approved WCMSA amount must be appropriately exhausted before Medicare will begin to pay for care related to the beneficiary’s settlement, judgment, award, or other payment."
• Benefit of WCMSA: "The primary benefit [of submitting a WCMSA] is the certainty associated with CMS reviewing and approving the proposed amount with respect to the amount that must be appropriately exhausted."
• Goal of WCMSA: "The goal of establishing a WCMSA is to estimate, as accurately as possible, the total cost that will be insured for all medical expenses otherwise reimbursable by Medicare for work-related conditions during the course of the claimant’s life, and to set aside sufficient funds from the settlement, judgment,or award to cover that cost."
• Creating a WCMSA: "Generally there are four steps involved in creating a CMS-approved WCMSA:
  • "Analysis of the claim and medical information in order to determine the amount of money required for the fund.
  • "Negotiation of a tentative settlement and preparation of draft settlement documents to settle the WC case incorporating terms for creation and administration of the WCMSA (CMS is not a party to the settlement).
  • "Obtaining approval from CMS regarding the settlement and the proposed WCMSA.
  • "Finalizing the settlement and funding the WCMSA."
• WCMSA funding:
  • "CMS has no process to accept up-front cash payments in lieu of a CMS reviewed WCMSA."
  • "WCMSAs may be funded by a lump sum or may be structured, such that a fixed amount of funds are provided each year for a fixed number of years."

CMS Review of WCMSAs - excluding structured settlement and rated age issues which S2KM will be address in subsequent blog posts.

• Introductory note: CMS introduced a WCMSA internet portal in November 2011 for submission of WCMSA proposals.
• Review threshold: "CMS will review a proposed WCMSA amount when the following workload review thresholds are met:
  • "The claimant is a Medicare beneficiary and the total settlement amount is greater than $25,000.00; or
  • "The claimant has a reasonable expectation of Medicare enrollment within 30 months of the settlement date and the anticipated total settlement amount for future medical expenses and disability/lost wages over the life or duration of the settlement agreement is expected to be greater than $250,000.00."
  • "A claimant has a reasonable expectation of Medicare enrollment within 30 months if any of the following apply:
    • "The claimant has applied for Social Security Disability Benefits.
    • "The claimant has been denied Social Security Disability Benefits but anticipates appealing that decision.
    • "The claimant is in the process of appealing and/or re-filing for Social Security Disability benefits.
    • "The claimant is 62 years and 6 months old.
    • "The claimant has an End Stage Renal Disease (ESRD) condition but does not yet qualify for Medicare based upon ESRD."
• Review not required: "It is unnecessary for the individual or beneficiary to obtain CMS approval for a proposed WCMSA amount if all of the following are true:
  • "The facts of the case demonstrate that the injured individual is only being compensated for past medical expense
  • "There is no evidence that the individual is attempting to maximize the other aspects of thesettlement (e.g., the lost wages and disability portions of the settlement) to Medicare’s detriment; and
  • "The individual's treating physicians conclude (in writing) that to a reasonable degree of medical certainty the individual will no longer require any Medicare-covered treatments related to the WC injury. However, if Medicare made any conditional payments for WC-related services furnished prior to settlement, then Medicare will recover those payments. In addition, Medicare will not pay for any WC-related services furnished prior to the date of the settlement for which it has not already paid."
• Review process:
  • "If you choose to use CMS’ WCMSA review process, the Agency requests that you comply with CMS 'established policies and procedures."
  • "When a WCMSA is submitted for approval, CMS must have certain documentation available to complete a review of the proposal. Table 1 lists the documents normally submitted with a WCMSA proposal."
  • "Submit the gross total settlement amount as a single lifetime number and NOT the settlement amount minus attorney fees, expenses, etc."
  • "Once this information is received, the COBC will apply it to the beneficiary's Medicare record and assign the case to the Medicare Secondary Payer Recovery Contractor (MSPRC)."
  • "The MSPRC will send the beneficiary a “Rights and Responsibilities” letter that explains Medicare's recovery rights with respect to conditional payments and information regarding what steps the beneficiary should take next."
  • "Once the Rights and Responsibilities letter is received, all further inquiries must be made through the MSPRC."
  • "If the parties to a WC settlement stipulate a WCMSA but do not receive CMS approval, then CMS is not bound by the set-aside amount stipulated by the parties, and it may refuse to pay for future medical expenses in the case, even if they would ordinarily have been covered by Medicare."
  • "If CMS approves the WCMSA and the account is later appropriately exhausted, Medicare will pay related medical bills for services otherwise covered and reimbursable by Medicare regardless of the amount of care the beneficiary continues to require."
  • "You can see your case’s status on the WCMSAP, if the case was submitted on the Portal. For cases that were submitted via mail, case status can be obtained by contacting the WCRC."
  • "When CMS does not believe that a proposed set-aside adequately protects Medicare’s interests,and thus makes a determination of a different amount than originally proposed, there is no formal appeals process. However, there are several other options available."

Life Care Plans

• "A Life Care Plan is a dynamic document based on published standards of practice, comprehensive assessment, data analysis, and research that provides an organized concise plan for current and future needs with associated costs for individuals who have experienced catastrophic injury or have chronic health needs."
• "A life care plan is appropriate when the claimant’s injury or disease is extensive and serious, e.g., paraplegia, quadriplegia, brain damage."
• "Although submission of a life care plan is optional, you are required to include drug and dosage lists. Include all pricing charts, cost projections, pricing information, and explanatory narratives and analyses."
• "When the parties to a WC settlement present CMS with “life care plans” or similar evaluations prepared by non-treating physicians to support and justify their proposed WCMSAs, Medicare will consider accepting such evaluations if the physician does all of the following:
  • "Examines the claimant;
  • "Reviews the claimant's medical records;
  • "Contacts any of the claimant's treating physicians (if applicable);
  • "Is available to answer CMS’ questions;
  • "Prepares a report that summarizes the above; and
  • "Offers a written medical opinion as to all of the reasonably anticipated future medical needs of the claimant related to the claimant's work injury or illness/disease."

Future Treatment

• "Determine the cost of future medical expenses that are directly related to the injury or illness suffered by the worker. This amount can be determined by reviewing medical records and past medical expenditures. The WCMSA must show the amount of money that should be invested to provide the yearly expenses for the worker’s life expectancy."
• "Note: In order to protect Medicare’s interests, a WCMSA should be funded based on the life expectancy of the claimant unless state law specifically limits the length of time that WC covers work-related conditions. The key is that both the principal amount that is to be set aside and the anticipated interest that it will earn must be sufficient to provide for the worker’s future medical treatment and administration fees for the worker’s lifetime."
• "Identify specific types of medical services or items, the frequency and duration of the medical services or items, and the projected costs of the medical services or items related to the work injury or disease that are expected in the future in light of the claimant's condition."

Time Frame

• "When you submit a WCMSA for review, CMS tries to review and decide on proposed settlements within 45 to 60 days from the time that all relevant documents are submitted."
• "Parties to the settlement may settle the indemnity (non-medical-expenses) portion of the claim separately from the WCMSA portion, in order to avoid having indemnity payments continue while CMS is still reviewing the proposal. CMS will still consider the whole claim, including indemnity, in its threshold calculations."

Administration

• "Once a WCMSA is established and funded, it must be administered."
• "This can be done by the claimant, by the claimant’s representative payee, appointed guardian, or conservator, or by a professional administrator."
• "The administrator of the account will be responsible for keeping accurate records of payments made from the account."
• "The administrator must establish the WCMSA account, pay Medicare-covered services from the WCMSA account, and provide CMS with a reporting of the expenditures from the WCMSA."
• "Every year, beginning no later than 30 days after the 1-year anniversary of settlement the administrator must sign and send a statement that payments from the WCMSA account were made for Medicare-covered medical expenses and Medicare-covered prescription drug expenses related to the work-related injury, illness, or disease."

Death of the Claimant

• "If a claimant dies before the WCMSA is completely exhausted, the [Regional Office] and [Medicare Secondary Payer Recovery Contractor] will ensure that all claims have been paid."
• "Then any amount left over in the WCMSA may be disbursed pursuant to state law, once Medicare’s interests have been protected."
• "This may involve holding the WCMSA open for some period after the date of death, as providers, physicians, and other suppliers are permitted to submit their initial bill to Medicare for a period of 12 months after the date of service."
• "Often, the settlement itself will dictate the appropriate dispersal of funds up on the death of the claimant."

For additional S2KM reporting about government benefit issues, see the structured settlement wiki. For analysis of the interaction of structured settlements and government benefits, see Chapter 15 of "Structured Settlements and Periodic Payment Judgments" (S2P2J).

ASNP 2013 Annual Meeting

Although special needs (SN) planning encompasses non-personal injury clients, settlement planning, with and/or without structured settlements, represents an increasingly important component of both the SN market and the educational focus of its practitioners.

The Academy of Special Needs Planners (ASNP) hosted its seventh annual meeting in Austin, Texas March 21-23 which featured the following topics and speakers:

• Impact of the Affordable Care Act on SN Planning - Scott Solkoff
• Modifying Problem Trusts into Effective Special Needs Trusts (SNTs) - Renee Lovelace
• SNT Issues at the Social Security Administration - Eric Skidmore, Sean Balser, Kevin Urbatsch
• The Jimmo v. Sibelius Medicare Settlement - Margaret Murphy
• SSI Update and New Social Security Strategies - David Lillesand
• Medicaid Third-Party Liability Liens Post-Ahlborn - Floyd Faigle
• Settlement Planning Under Changing Conditions - Donna Meyer, Sharon Pope, Patrick Hindert, Jason Lazarus
• Drafting Special Needs Trusts - Nancy Chudacoff, Sheri Sudweeks, Vincent Russo
• Establishing the Financial Needs of the Special Needs Beneficiary - Jerry Hulick
• Administration of SNTs - Travis Finchum, Kathy Christofell, Jerry Hulick, Renee Lovelace
• Determining a Reasonable Attorney Fee - Mary Alice Jackson

Settlement Planning and Structured Settlement Highlights

Affordable Care Act

• ACA and Settlement Planning - The Affordable Care Act (ACA) changes settlement planning in fundamental ways which speaker Scott Solkoff highlighted in his comprehensive review:
  • Reduced personal injury verdicts and settlements.
  • A different calculus for determining future medical damages based upon health insurance costs.
  • Fewer first party special needs trusts (SNTs).
  • Reduced demand for Medicare and Medicaid for persons with disabilities under age 65.
  • New opportunities for special needs attorneys because of the complexity of the ACA.
• ACA, Verdicts and Settlements - S2KM will address the impact of the ACA on personal injury verdicts and settlements in future blog posts.
• ACA, SSA and SNTs - During an ASNP question and answer session moderated by Kevin Urbatsch and featuring representatives of the Social Security Administration (SSA Question and Answer session), the following exchange occurred:
  • Question: will the SSA allow early termination of SNTs to comply with ACA?
  • SSA Answer: right now, any early termination of a SNT will require payment of reversionary interest.

Settlement Planning and SN Attorneys

The ASNP settlement planning panel was one of several presentations which identified expanding opportunities for SN attorneys. Patrick Hindert, author of S2KM's blog, provided an analysis of the settlement planning market which emphasized changing structured settlement business and transactional models. Hindert highlighted the need for better standards and metrics as well as the importance of qualified settlement funds (QSFs) and the secondary structured settlement market. Sharon Pope discussed settlement planning practice issues and provided sample documents to help special needs attorneys expand their settlement planning practice. Jason Lazurus summarized new developments and cases impacting the use of Medicare set-aside arrangements in liability cases.

For SN attorneys to expand their settlement planning practice, ASNP's panel recommended more in-depth study of non-SNT settlement planning issues including the settlement planning market, the settlement planning team and the settlement plan itself. The panel's handout materials also identified a list of settlement planning documents organized among the following stages of the settlement planning process:

• Engagement
• Assessment
• Design
• Negotiation
• Implementation
• Monitoring

In addition to the settlement planning panel, multiple ASNP presenters discussed specific settlement planning issues. In addition to settlement topics and presenters mentioned elsewhere:

• Jimmo v. Sibelius - Margaret Murphy summarized this recent settlement which has important implications for anyone who needs skilled care as well as for skilled nursing facilities, home health and outpatient facilities. As a result of this settlement, Medicare claims should no longer be denied on a rule-of-thumb determination that a beneficiary's condition is not improving.
• WOS v. E.M.A. - Floyd Faiglie made a last minute addition to his Medicaid lien presentation to address this March 20, 2013 U.S. Supreme Court decision. The decision expanded the Supreme Court's previous Alhborn decision; rejected arguments by North Carolina defending its third party recovery statute; and further limits when a state may demand recovery from a portion of a settlement allocated to non-medical damages.
• Modifying Problem Trusts into Effective SNTs - Renee Lovelace recommended a cost benefit analysis formula for analyzing whether and when to modify a problem trust. Her analysis was process-driven and included: identifying problems, possible benefits, options, and cost of changes; quantifying costs and benefits; and determining the extent of any modification.
• Determining a Reasonable Attorney Fee - Mary Alice Jackson reviewed the eight factors listed in ABA Model Rule 1.5 for determining the reasonableness of a fee and discussed those factors in the context of SNTs. Note (added 3/31/2013): In his SSI update (see below), David Lillesand addressed the issue of whether and when SN attorneys need SSA approval of their attorney fees to avoid penalties resulting from poor quality draftsmanship in the Social Security Act attorney fee regulations.
• Establishing Financial Needs of the Special Needs Beneficiary - Jerry Hulick's presentation addressed special care, the special care team, special care information needs, and special care documents outside of the settlement planning context.
• Drafting Special Needs Trusts - Nancy Chudacoff, Sheri Sudweeks, and Vincent Russo presented ASNP's new Model Third Party SNT. Third party SNTs typically are used outside of the settlement planning context.

Structured Settlements

• ACA - Scott Solkoff noted in his ACA presentation that, after the ACA takes full effect January 1, 2014, structured settlements will more likely fund future health insurance costs, which should be lower and more predictable, than future medical expenses.
• "Over-structuring" - The ASNP panel discussing SNT administration (Travis Finchum, Kathy Christofell, Jerry Hulick, Renee Lovelace) emphasized a common complaint among SN attorneys: plaintiff attorneys frequently contact SN attorneys to draft a SNT on short notice after an "over-structured" settlement has already been reached. This panel discussion followed Lovelace's earlier presentation ("Modifying Problem Trusts") during which she highlighted expanding litigation against fiduciaries. S2KM's suggested solutions for fiduciaries to address the problem of "over-structuring": promote QSFs; enforce product suitability standards; or, as a last resort, utilize the secondary market to obtain increased liquidity for the trust.
• Deficit Reduction Act - The ASNP's SNT administration panel did not discuss whether the annuity rules in the Deficit Reduction Act of 2005 (DRA) are applicable to structured settlements. S2KM is not aware of any definitive authority addressing this issue. For S2KM's previous analysis of the DRA and structured settlements, summarizing a presentation by Sylvius von Saucken, see "Inconvenient Questions".
• Secondary Market - The SSA Question and Answer session did not address structured settlements. During a similar session at the ASNP 2012 Annual Meeting, Eric Skidmore, an SSA representative, confirmed an unpublished (and controversial) SSA position: the SSA believes the existence of the secondary market renders structured settlement annuities "available resources" that potentially disqualify special needs trusts beneficiaries from receiving Medicaid.

Congratulations to ASNP and conference Chairman David Lillesand for an outstanding 2013 educational program which also featured two special needs presentations by Lillesand: a supplemental "Back to Basics" program and a Supplemental Security Income (SSI) update.

For S2KM summaries of prior educational conferences of the ASNP, and other professional associations addressing settlement planning issues, see the structured settlement wiki.  For S2KM's listing of Spring 2013 educational conferences featuring settlement planning and structured settlement presentations, see this prior S2KM blog post.

Structured Settlements in 2012 - 2

Settlement Planning

Compared with the structured settlement primary market, which was characterized by continuing sales declines in 2012, the related settlement planning market appears to have experienced growth and vitality in 2012.

The primary evidence of this growth and vitality consisted of the increasing number of educational conferences addressing settlement planning topics during 2012. These included:

• Society of Settlement Planners (SSP) Annual Meeting
• Risk Settlement Planning Practicum
• Academy of Special Needs Planners (ASNP) Annual Meeting
• Qualified Settlement Fund Symposium
• Various National Academy of Elder Law Attorney (NAELA) Conferences - of which S2KM attended the 2012 Ohio NAELA Unprogram.

One of the challenges for measuring the growth of the settlement planning market is the lack of market metrics. For example, despite continuing market inquiries, S2KM has been unable to identify reliable national market metrics for qualified settlement funds, special needs trusts, settlement trusts, or Medicare set-aside arrangements.

Towers Watson Studies

The most valuable market research for settlement planning S2KM has identified has been the Annual Studies of United States Tort Costs published by Towers Watson (formerly Towers Perrin) since 1985. These studies:

• Calculate tort costs resulting from five insured plus uninsured business lines: 1) commercial multi-peril; 2) medical malpractice; 3) product liability; 4) other liability; and 5) commercial auto.
• Exclude: 1) no-fault auto insurance; 2) property coverages; 3) workers compensation; 4) certain extraordinary (one time) costs.
• In 2002, Towers Watson also translated overall tort costs for 2001 into the following categories and percentages: 1) administrative costs (21%); 2) defense costs (14%); plaintiff attorneys (19%); economic loss (22%) and non-economic loss (24%). Towers Perrin discontinued this portion of its analysis in 2002. It was "devilishly difficult" according to Russ Sutter, a Towers Watson principal and actuary who directs their annual tort cost studies, "primarily because we lack reliable information from plaintiff attorneys". These percentages therefore represented Tower Watson's "best estimate" in 2002.

Based upon Towers Watson's most recent 2011 Annual Study and utilizing Tower Watson's 2002 "best estimate" of payout percentages, S2KM estimates, that at least since 2006, more than $160 billion of United States tort costs annually have represented payments to injury victims and their attorneys.

Settlement Planning Issues

Among many settlement planning issues, S2KM viewed the following as the most strategically important during 2012:

• The evolutionary relationship between structured settlements and settlement planning;
• Comparing these two business models;
• Improving settlement planning by expanding structured settlements;
• What we have learned about the settlement planning market;
• Settlement planning tax challenges - including stress-induced physical ailments;
• How the Affordable Care Act (ACA) impacts settlement planning;
• How states are reforming Medicaid programs to address budgetary shortfalls and the ACA;
• Whether a standard of practice exists for using Medicare set-aside arrangements in liability cases;
• The application of product suitability standards to settlement plans funded with structured settlements;
• The impact of Dodd-Frank's uniform fiduciary standard on settlement planning.

Additional post in S2KM's blog series: "Structured Settlements in 2012":

• Part 1 - Primary market

• Part 2 - Settlement planning

• Part 3 - Secondary market

• Part 4 - Executive Life of New York

MSAs and Liability Cases - 3

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.

S2KM has addressed this topic in two prior blog posts:

• MSAs and Liability Cases 1: summarizing recommendations for MSAs in liability cases issued by the National Academy of Elder Law Attorneys (NAELA) for special needs attorneys (case specific) and the American Bar Association (ABA) for the United States Congress (legislative).
• MSAs and Liability Cases 2: reviewing an article by Peter Wayne that offers advice to plaintiff attorneys about Medicare compliance generally in liability cases.

An article by Aaron D. Frishman published in the Fall 2012 issue of the NAELA Journal titled "Medicare Set-asides in Personal Injury Cases: Is There a Standard Method of Practice?" expands and updates analysis of this challenging settlement planning issue.

Frishman's article:

• Provides historical background about the Medicare Secondary Payer (MSP) Act and the evolution of MSAs in workers compensation cases.
• Details the three primary arguments for and against MSAs in liability cases:
  • Statutory basis for MSAs
  • Actions taken by CMS and its regional offices
  • Risks of attorney liability.
• Reviews
  • NAELA's 2010 liability MSA Task Force Report.
  • The ABA's 2011 Resolution 108A urging Congress to enact new MSA legislation.
  • The 2011 Hinsinger v. Showboat Atlantic City case "that found MSAs in third party liability cases to be synonymous with those in workers’ compensation matters." while addressing the issue of whether a liability set aside should be reduced for procurement costs.
  • Proposed MSA rule changes CMS released June 15, 2012 in the form of an "advanced notice of proposed rule-making" (ANPRM).

Frishman's conclusions for MSA's in non-workers compensation personal injury cases:

• No clearly identifiable best practice currently exists.
• MSAs are not currently a mandatory method for satisfying Medicare's interests.
• There is currently no published history of any suit by Medicare against any party in a personal injury suit for the failure to establish an MSA.
• Whether to use an MSA is case specific and ultimately the client's choice.
• Attorneys should fully informed their clients of the issues related to future medical expenses and Medicare’s interest.
• At a minimum, attorneys should discuss the potential use of MSAs in personal injury contexts with their clients and all parties involved.
• An attorney should always consider the size of the settlement, as well as the plaintiff’s Medicare eligibility status, when evaluating whether to use MSAs in personal injury settlements.
• An attorney’s examination of the issues should include an in-depth cost-benefit analysis of the plaintiff’s circumstances.
• When an attorney is determining whether to advise his or her client to use an MSA in a personal injury settlement, it is reasonable to assume that the following CMS rules for workers compensation cases would apply:
  
  • The total settlement amount is greater than $25,000; or
  • The plaintiff has a reasonable expectation of enrolling in Medicare within 30 months from the settlement date and the anticipated total settlement amount is expected to be greater than $250,000.
• Until CMS or Congress provides firm authority regarding the application and enforcement of the MSP Act in personal injury settlements, uncertainty will continue regarding MSA use in these contexts.

For additional S2KM reporting about the relationship of structured settlements and settlement planning to Medicare, Medicaid and health care reform, see the structured settlement wiki.

Settlement Planning Market - 1

Following three 2012 settlement planning conferences, what have we learned, and what do we still need to know, before settlement planning can be recognized and analyzed as a business and professional market?

The settlement planning conferences provided:

• Definitions for Settlement Planning - Joseph Tombs, Director of the Registered Settlement Planner (RSP) certification program, defined settlement planning as "a profession helping recipients of settlement proceeds use those proceeds to achieve post-loss goals and transition successfully to post-settlement financial life. Settlement planners represent a blend of several professionals: part tax lawyer, trial lawyer, special needs lawyer, financial planner, annuity specialist, social worker, and medical case worker."
• Descriptions of an Emergent Profession - Several conference speakers described settlement planning as a larger and more complex successor business and profession for structured settlements. For example, Jack Meligan stated: "SSP and its members have been promoting the practice of Settlement Planning as a more comprehensive solution for the financial issues facing personal injury victims and their families, and the profession of Settlement Planning as the next evolutionary step for members of the financial and legal communities that serve these injured Americans."
• Product Introductions and Descriptions - In addition to structured settlement annuities, conference speakers discussed multiple financial and insurance products in the context of settlement planning including: settlement trusts; blended structures; alternative asset management options; market linked CDs; long term care insurance; life insurance; and reinsurance.
• Government Benefit Updates - Integrating financial and insurance products with available government benefits represents one of the most important settlement planning priorities and requires effective interaction among multiple settlement planning participants. The conferences highlighted settlement planning roles for special needs attorneys as well as financial and insurance professionals. In addition, government benefit developments related to settlement planning were discussed including new requirements for liability Medicare Set-Asides (MSAs) and special needs pooled trusts as well as the Patients Protection and Affordable Care Act.
• Tax Law Updates and Improvements - In addition to integrating tort settlement proceeds with government benefits, settlement planning requires careful tax planning and specialized document drafting. The SSP conference featured Robert Wood and Jeremy Babener, who provided tax law tips and updates for settlement planners, as well as David Higgins, who proposed a potential tax law alternative to expand the use of structured settlement annuities in settlement planning.
• Business Standards and Practices Discussions - The SSP's "Standards of Professional Conduct for Settlement Planners" (SSP Standards) represents a significant accomplishment and valuable industry resource.  Professor Carl Pierce, who helped review and draft the SSP Standards, continued his analysis of related settlement planning issues as part of the Risk Settlement Planning Practicum. Karen Meyers, Director NSSTA's Certified Structured Settlement Consultant (CSSC) program, led a discussion about product suitability during the SSP Annual Meeting.

Unanswered Questions

Despite continuing educational progress, however, certain questions about the settlement planning market still need to be prioritized and addressed before settlement planning becomes a recognized business and profession. Among the most fundamental and important:

• What types of settlements comprise the settlement planning market?
• How large is the settlement planning market?
• Is the settlement planning market increasing or decreasing?
• What informational resources exist to help answer these questions?

Towers Watson Updates

Beginning with the last question, S2KM recommends the Towers Watson updates on "U.S. Tort Cost Trends" as a starting point for discussing the settlement planning market. Since 1985, Towers Watson (and its antecedent Towers Perrin) have published 15 such updates with the most recent 2011 update analyzing U.S. tort costs from 2010. Each study:

• Consists of three components: 1) losses paid to third parties; 2) defense costs; and 3) administrative expenses.
• Calculates tort costs resulting from five insured plus uninsured business lines: 1) commercial multi-peril; 2) medical malpractice; 3) product liability; 4) other liability; and 5) commercial auto;
• Excludes: 1) no-fault auto insurance; 2) property coverages; 3) workers compensation; 4) certain extraordinary (one time) costs - example: tobacco litigation.

Highlights from Towers Watson's "2011 Update on U.S. Tort Cost Trends"

• The tort costs in 2010 ($264.6 billion) were the highest in U.S. history and represent a 5.1% increase from $251.8 billion in 2009. Towers Watson estimates the 2010 U.S. tort system cost approximately $857 per person, versus $820 per person in 2009.
• Towers Watson attributes the increase to the April 2010 Deepwater Horizon drilling rig explosion and resulting oil spill in the Gulf of Mexico. Absent the costs from this event, Towers Watson estimates 2010 tort costs would have decreased 2.4% from 2009.
• Since 1984, tort costs as a ratio of U.S. Gross Domestic Product (GDP) have ranged from a low of 1.70% to a high of 2.30% with relatively rapid increases in the ratio during the mid-1980s and early 2000s offset by intermittent and multi-year declines in the ratio.
• Since 1950, even adjusting for inflation, increases in U.S. tort costs have far exceeded U.S. population growth. However, inflation-adjusted tort costs per capita were 16% lower in 2010 than in the peak year of 2004.
• The weak U.S. economy has had a notable impact on commercial auto insurance claims. 2010 tort costs were the lowest since 2000 and 19% lower than 2004.
• Although medical malpractice costs have increased at an average annual rate of 9.7%, versus 7.5% for all other tort costs, since 1975, growth in medical malpractice costs from 2005 to 2010 averaged only 0.3% per year.
• Looking ahead, Towers Watson:
  • Anticipates employee practices litigation to be significant in the future despite the U.S. Supreme Court's 2011 ruling in favor of Wal-Mart in the sexual discrimination and civil rights class action case Wal-Mart Stores Inc. v. Betty Dukes et al.
  • Identifies "fracking" (a natural gas drilling process that extracts natural gas from shale by using water and chemicals which could result in contaminated drinking water) as a new area of litigation where defense costs are beginning to mount.

Up until its 2002 update of "U.S. Tort Cost Trends", Towers Watson also translated annual tort costs into the following cost categories (with 2001 percentages): 1) administrative costs - 21%; 2) defense costs - 14%; 3) plaintiff attorneys -19%; 4) economic loss - 22%; and 5) non-economic loss - 24%.

Note: Towers Watson discontinued this latter portion of its analysis in 2002, according to Russ Sutter, a Tillinghast principal and actuary who directs the Towers Watson study, "primarily because we lack reliable information from plaintiff attorneys". These percentages therefore represent Towers Watson's "best estimate" in 2002.

S2KM assumptions: lacking alternative estimates of tort cost payment categories and percentages, Towers Watson's "best estimate" in 2002 for 2001 U.S. tort costs continues to represent the most reliable annual analysis of U.S. tort dollars paid to claimants and their attorneys.

Applying Towers Watson's percentages for 2001 to the results of Towers Watson's analysis of 2010 U.S. tort costs ($264.6 billion total), produces the following assumptive results: 1) administrative costs - $55.6 billion; 2) defense costs - $37.0 billion; 3) plaintiff attorneys - $50.3 billion; 4) economic loss - $58.2 billion; and 5) non-economic loss - $63.5 billion.

Utilizing both Towers Watson's 2011 update of its "U.S. Tort Cost Trends" plus S2KM's assumptions based upon Towers Watson's additional 2002 "best estimate" for 2001 produces the following assumptive results for 2010:

• Economic loss of $58.2 billion plus non-economic loss of $63.5 billion (both amounts presumably paid to claimants) equals $121.7 billion of tort-related dollars paid to claimants.
• $121.7 billion plus $50.3 billion paid to plaintiff attorneys equals $172 billion of tort-related dollars paid to plaintiffs and their attorneys.

S2KM will reference and utilize these 2010 annual assumptive "tort cost results" in subsequent blog posts while continuing to discuss the settlement planning market. For additional S2KM reporting about settlement planning, see the structured settlement wiki.

SSP 2012 Annual Meeting - 1

The French author and poet Victor Hugo has been translated and quoted as saying: "There is nothing more powerful than an idea whose time has come."

Has the time come for "settlement planning" to be recognized as a powerful idea deserving professional study and status in the United States? Recent conferences, including the Society of Settlement Planners (SSP) 2012 Annual Meeting, suggest that settlement planning is becoming both an important profession and an alternative business model for the structured settlement industry.

As a foundation for professional status, SSP has previously developed the Registered Settlement Planner (RSP) Program and adopted Standards of Professional Conduct. The 2012 Annual Meeting, held April 30 - May 1 in Las Vegas, featured presentations by leading settlement planning practitioners and subject matters experts. In addition, several product providers introduced insurance and financial products to complement the traditional structured settlement annuity.

What is settlement planning? Joseph Tombs, a former SSP President and co-founder of the RSP program, defines settlement planning as "... a profession helping recipients of settlement proceeds use those proceeds to achieve post-loss goals and transition successfully to post-settlement financial life."

What is a settlement planner? The SSP Standards of Professional Conduct define "settlement planner" as "... a representative who provides advice and other services to a person participating in the design, negotiation or implementation of a settlement or satisfaction of judgment for the benefit of a person claiming a legal entitlement to an award of damages or other compensation."

SSP conference Keynote Speaker Michael Ellsberg, author of "The Power of Eye Contact" and "The Education of Millionaires", discussed how to "Invest in Your Own Human Capital".

Settlement Planning Practitioners and Subject Matter Experts and Topics:

• 2011 SSP President Jack Meligan - SSP Accomplishments
• 2012 SSP President Charles Schell - SSP Goals
• Joseph DiGangi - Reinventing the Settlement Industry
• Douglas Shaw - Medicare Liens
• Robert Wood - Tax Update
• Jeremy Babener - Settlement Agreements and IRS Challenges
• Karen Meyers - Suitability Standards
• Patrick Hindert - Settlement Planning Business Models
• David Higgins - Litigation Rollover Accounts
• Jason Lazurus - Liability MSAs
• Frank Maguire - Overcoming Stalled Markets
• Mark Wahlstrom - Market Trends and Challenges
• Daniel Hindert - The ELNY Liquidation
• Richard Risk - History of Settlement Planning
• Dan Alverez - Lien Resolution
• Joseph Tombs - The RSP Program

Settlement Planning Product Providers

• Wesley Cosgriff - Secured Futures Trust
• John Woolway - Vantage Investment Partners
• Robert Noack - Aequitas Capital Management
• Christi Fried - Continental Trust Services
• Paul Hansen - Morgan Stanley Smith Barney
• Major General James W. Comstock (ret.) - Alternative Design Insurance Services
• Anthony Prieto - Synergy Settlement Services
• James Creel - First Capital Surety & Trust Co.
• Robert Burney - Integrity Financial, Inc.
• Mal Deener - Symetra Life Insurance Company (on behalf of Berkshire Hathaway Life Insurance and National Indemnity)

In subsequent blog posts, S2KM will review selected SSP conference topics. For S2KM reporting of prior SSP meetings, see the structured settlement wiki.

Risk Settlement Planning Practicum

Sheltered from the violent storms that unleashed dozens of tornadoes across Oklahoma and the plains states on April 13-14, 2012, the University of Tulsa College of Law hosted the Richard B. Risk Jr. Settlement Planning Practicum which organizers believe was the first time any law school has sponsored a settlement planning educational conference.

Risk, a national authority on structured settlement law and one of the founders of the Society of Settlement Planners (SSP), endowed the settlement planning practicum which is expected to become an annual event for attorneys and law students. Risk invited and introduced the practicum presenters in the following speaking order: Joseph Tombs, Patrick Hindert, Mark Popolizio, Jeremy Babener, Jack Meligan and Professor Carl Pierce.

Joseph Tombs

Tombs, a lawyer, certified financial planner and former SSP President who, working with Risk, helped organize the Registered Settlement Planner (RSP) certification program, addressed "Common Issues Attorneys Face When Settling Cases". As part of his presentation, Tombs contrasted settlement planning and financial planning. One primary difference, according to Tombs, is the relative importance in settlement planning of "dissipation risk". Other differentiating factors identified by Tombs include the importance of: government benefits, medical forecasting and special needs legal issues. Tombs discussed structured settlements as a core settlement planning tool that combines relatively low investment and dissipation risks.

Tombs emphasized the multi-professional skill sets settlement planning requires and described settlement planning as an evolving profession stating: "The more we study and practice settlement planning, the more we realize its complexity and understand its challenges." He offered the following definition for settlement planning: "a profession helping recipients of settlement proceeds use those proceeds to achieve post-loss goals and transition successfully to post-settlement financial life."

Patrick Hindert

In his presentation titled "The History of Structured Settlements", Hindert (co-author of "Structured Settlements and Periodic Payment Judgments" and author of S2KM's blog) provided a visual analysis featuring schematic diagrams to explain how structured settlement has evolved from a claim management tool into a core component of the larger and more complex settlement planning profession - and how competing business models have restricted the growth of the structured settlement annuity market.

Hindert stated key structured settlement stakeholders have succumbed to "path dependence" by failing to strategically study and analyze continuing industry changes. Structured settlement business models and practices that once made sense and represented "industry standards", according to Hindert, have survived despite the eclipse of their justification, benefit and/or better alternatives.

Hindert described settlement planning as an "emergent system" and quoted John McWhorter, a linguist at Columbia University, to help explain the significance for structured settlements:

"Emergent systems [settlement planning] are ones in which many different elements interact. The pattern of interaction then produces a new element [settlement planning] that is greater than the sum of the parts, which then exercises a top-down influence on the constituent elements [including structured settlements]."

To improve and grow the structured settlement market, Hindert recommended more detailed and comprehensive study of alternative structured settlement payment models and life cycles within the broader context of settlement planning as an important and necessary first step.

Mark Popolizio

A nationally recognized legal authority in Medicare Secondary Payer (MSP) compliance and a current board member of the National Alliance of Medicare Set-Aside Professionals (NAMSAP), Popolizio addressed how Medicare impacts settlement planning. Starting with an introductory Medicare road map, he next discussed CMS' reimbursement rights for conditional Medicare payments - who is at risk; what is Medicare's recovery amount; how to challenge conditional payments; how to obtain information; CMS' most recently announced policies and payment options; and recent case law developments.

Popolizio also discussed Medicare set-aside arrangements (MSAs), in the context of both workers compensation and liability cases, as CMS' recommended method for protecting Medicare's future interests under the MSP Act. For liability cases, he began by emphasizing why the key issue is not: "Are liability MSAs required?" Instead, Popolizio reviewed two recent CMS memoranda providing informal information about how CMS looks at liability MSAs. Finally, Popolizio offered his own recommendations (a three-step process) for approaching the liability MSA issue and also reviewed recent related case law.

Jeremy Babener

Babener, a rising star among structured settlement legal and tax experts, offered a comprehensive overview of "Taxation in Personal Injury Cases". He began by outlining sources for tax authority, the variables for tax liability and the character of income. Next, he discussed the exclusion for personal injury damages and explained the language of IRC 104(a)(2) before addressing other damages in personal injury cases - past and future medical expenses; punitive damages; and pre and post-judgment interest.

Babener explained the importance of documentation, including the complaint and the settlement agreement, to maximize the exclusion for personal injury damages. He highlighted specific facts that frequently create problems with the IRS and conversely how to encourage the IRS to respect the documents so as to obtain the preferred tax result. Babener concluded by addressing these additional settlement tax considerations: legal expenses; structured settlements; qualified settlement funds; and transfers of structured settlement payment rights.

Jack Meligan

Meligan, a founder and current President of the SSP, discussed "Pitfalls in Settlement Planning and How to Avoid Malpractice"; offered reasons why personal injury claimants and their attorneys need settlement planning advice from a qualified professional or team of professionals; and reviewed an example of a settlement plan. In addition, Meligan:

• Summarized three cases (Grillo; Lyons; and Spencer) to demonstrate why structured settlements need to be considered and risks associated with certain business behavior;
• Cited statistics from American Bar Association studies to underscore the frequency and risk of malpractice cases against personal injury attorneys;
• Spotlighted danger areas for plaintiff attorneys: MSP compliance; deductability of attorney fees; and documentation of confidentiality clauses; and
• Cautioned plaintiff attorneys against failing to retain an independent settlement advisor; or to advise their clients about all settlement options (including the pros and cons of structured settlements); or to completely document their files as proof of their best practices.

Professor Carl Pierce

Professor Pierce is the W. Allen Separk Distinguished Professor of Law and Director of the Howard Baker, Jr. Center for Public Policy at the University of Tennessee. Among his professional activities, Professor Pierce has served as Reporter for the Tennessee Bar Association Standing Committee on Ethics and Professionalism and as Associate Reporter for the American Bar Association Special Commission on Evaluation of the Rules of Professional Conduct. During 2007-2008, Professor Pierce served as Consultant to the Society of Settlement Planners (SSP) and helped review and draft the SSP's Standards of Professional Conduct for Settlement Planners (SSP Standards).

Professor Pierce provided a summary comparative analysis of both the National Structured Settlement Trade Association (NSSTA) Statement of Ethics and Professional Responsibility (NSSTA Code of Ethics) and the SSP Standards. Despite substantial experience working with litigators, Professor Pierce acknowledged surprise by the degree of hostility between some plaintiff and defense structured settlement consultants. Professor Pierce:

• Observed that all law school graduates need some exposure to structured settlements and settlement planning;
• Suggested that the business collaboration models among insurance companies, plaintiff attorneys and settlement planners could look very different in the future; and
• Recommended that representatives of NSSTA and SSP meet to discuss and compare their respective statements of ethics and standards.

Congratulations to Richard Risk, the University of Tulsa College of Law and the guest speakers who participated in the Settlement Planning Practicum. S2KM understands that Tulsa College of Law will publish a video compilation of the practicum speaker presentations on YouTube.

Spring 2012 Conferences

During the next four weeks, S2KM will attend and review three professional educational conferences addressing structured settlement and settlement planning issues:

• Richard B. Risk Jr. Settlement Planning Practicum
• National Structured Settlement Trade Association (NSSTA) Annual Meeting
• Society of Settlement Planners (SSP) Annual Meeting

Risk Practicum

A national authority on structured settlement law, Richard Risk has endowed a series of annual settlement planning "practicums" at his law school alma mater, The University of Tulsa College of Law. Risk believes the 2012 practicum, scheduled for April 13-14, will represent the first time any law school in the country has formally recognized settlement planning as a topic of legal education. Speakers: Joseph Tombs; Patrick Hindert; Mark Popolizio; Jeremy Babener; Jack Meligan; Carl Pierce.

NSSTA Annual Meeting

NSSTA's Annual Meeting, scheduled for April 25-27 in Washington, D.C., will feature a mixed agenda of business and political meetings; NSSTA "Takes the Hill" meetings with Members of Congress and senior Congressional Staffers; plus an educational program headlined by Senator Max Baucus, Congressman Richard Neal, NOLHGA Chairman Thomas Ronce and President Peter Gallanis, Mike Montemurro of the IRS, a Congressional Chiefs of Staff panel, plus various NSSTA leaders and property & casualty insurance representatives.

SSP Annual Meeting

SSP will host its Annual Meeting April 29-May 1 in Las Vegas. The SSP educational program will feature 27 speakers discussing strategies to improve and grow the settlement planning market. Some of the SSP presentation categories:

• Revitalizing and reinventing structured settlements
• New NAIC annuity regulations
• Insurance, investment and administrative options
• Tax developments, strategies and legislative proposals
• Medicare (MSA) and Medicaid (SNT) updates
• What ELNY means for settlement planners

In addition to these three 2012 conferences, S2KM previously attended and reviewed the Academy of Special Needs Planners (ASNP) 2012 Annual Meeting. For S2KM's complete reporting about professional associations whose members participate in structured settlements and settlement planning, see the structured settlement wiki.