Beyond Structured Settlements

ASNP 2012 Annual Meeting

The Academy of Special Needs Planners (ASNP) hosted its Sixth Annual Conference March 8-10, 2012 in Memphis, Tennessee. Consistent with its prior conferences, ASNP and Conference Chairperson Michele Fuller provided an exceptional educational experience featuring preeminent speakers, valuable topics, quality handout materials, plus effective interaction with sponsors and exhibitors.

ASNP is one of three national associations of attorneys, the others being the Special Needs Alliance (SNA) and the National Academy of Elder Law Attorneys (NAELA), whose members engage in special needs planning. The primary difference between special needs planning and settlement planning is that special needs planning includes clients whose disabilities result from many causes including but not limited to personal injury or workers compensation accidents.

One of the highlights of the ASNP conference was a special introductory program titled "Basics of Special Needs Planning" presented by Fuller and two other nationally renowned special needs attorneys, Kevin Urbatsch and David Lillesand. This program addressed the core components of special needs planning (including the role of structured settlements), explained public benefits, and discussed the basics of special need trust (SNT) administration.

Structured settlements were also addressed by other ASNP presenters:

• Rene Reixach - During his presentation titled "Impact Litigation", Reixach highlighted continuing litigation whereby state Medicaid agencies are attempting to disqualify SNTs funded with structured settlements arguing the existence of the secondary market makes structured settlement annuities "saleable" and therefore "countable" as an "available resource".
• Eric Skidmore - Skidmore, a Supervisor in the Office of SSI and Representative Payee Policy at the Social Security Administration (SSA), provided a "Social Security Update" during which he reconfirmed an unpublished SSA position supporting what Reixach reported - i.e. the SSA believes the existence of the secondary market renders structured settlement annuities "available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.
• Jason Lazarus - Speaking about "Liability MSAs", Lazarus reconfirmed the current cost advantages of funding Medicare Set-Aside arrangements (MSAs) with structured settlement annuities as opposed to cash. His presentation included structured settlement case examples that underscored this cost advantage.

One glaring omission that characterizes most national structured settlement and settlement planning conferences is the surprising lack of attention paid to real life problems and issues experienced by persons with disabilities and their families. The 2012 ASNP conference emphasized these real life problems and issues with three valuable presentations:

• Annette Hines and Linda Brown - Hines and Brown, both special needs attorneys whose families include persons with disabilities, spoke about "Transition Planning" - the change in status for disabled persons from behaving as a student to assuming emergent adult roles in the community. Subtopics discussed: a "Day in My Life" from a parents' perspective; myths about special needs planning; transition agencies; disability support systems; selecting trustees and guardians; role of guardians; personal budgets; housing options including Section 8 qualification and the rent vs.buy decisions; plus group home issues including expense sharing.
• Vincent Russo and Michael Amoruso - Russo and Amoruso presented a series of video vignette interviews of families with disabled persons in their discussion titled "Creating the Right Plan for the Right Situation." Each of the interviews originally appeared on the television show "Family Comes First" for which Russo serves as a host. After the ASNP audience watched each interview, Russo and Amoruso asked questions and offered observations to help ASNP conference attendees learn to differentiate individuals and families on the basis of such issues as: independence; information needs and overloads; life visions; and legal capacity. They emphasized the need to make special needs trusts responsive to specific family situations.
• Harry Margolis and Jerry Hulick - Margolis and Hulick discussed a special needs case study from a financial perspective that emphasized the role of life insurance.  Note: although life insurance companies feature prominently in both the special needs and structured settlement markets, there appears to be almost no overlap among agents distributing their products even though both markets focus on disabled individuals and their families.

Another glaring omission to date at national structured settlement and settlement planning conferences has been the lack of educational inquiry about how the Patient Protection and Affordable Care Act [Affordable Care Act (ACA) - aka Health Care Reform] impacts their customers, their products and their traditional business models. The justification for this educational omission may be the uncertainty resulting from the current constitutional review of the ACA by the United States Supreme Court.

Fortunately, the ASNP has not been paralyzed educationally by this constitutional uncertainty. At the ASNP 2011 Annual Meeting, Cynthia Barrett offered her introductory analysis of how Health Care Reform impacts persons with disabilities. At the ASNP 2012 Annual Meeting, David Lillesand discussed how the prohibition against "pre-existing condition" exclusions mandated by the ACA (already in effect in 22 states) impacts special needs legal practice generally and self-settled (first party) special needs trusts specifically.

In summary, based upon his experience in Florida, where the ACA's prohibition against pre-existing exclusions currently exists, Lillesand believes:

• The need for self-settled (first party) special needs trusts has decreased (except when a beneficiary requires long term institutional care) because the ACA provides better insurance options than Medicaid for many persons with pre-existing medical conditions including personal injury victims.
• Existing self-settled (first party) special needs trusts should be reviewed, in the context of the ACA's prohibition against pre-existing condition exclusions and available medical insurance options, and in many cases terminated.
• Damages for future medical costs in personal injury lawsuits could be reduced assuming the premium costs of newly available insurance premiums become admissible in proving and/or defending damages.

Apropos to transition planning for persons with disabilities and terminating special needs trusts, Travis Finchum, Fuller and Urbatsch spoke about "Trust Transitions" - what to do when your bank trustee doesn't want you anymore or you don't want them? Their subtopics included: "the dark side of pooled trusts"; security of funds managed by individual trustees and pooled trusts; trust protectors; questions to ask potential private professional trustees; fiduciary certification and standards; plus discussion and analysis of trust provisions and revision issues.

To help ASNP attendees improve their legal practice, Steve Riley addressed "Key Strategies for Growing Your Practice and One Sure Fire Way to Kill It". The killer, according to Riley: "Inertia - which is easy; but change is hard" - which is also a good lesson for structured settlement and settlement planning stakeholders.

Congratulations to Chairperson Michele Fuller, the speakers and exhibitors for another outstanding ASNP educational conference. For S2KM's reporting about prior ASNP educational conferences, see the structured settlement wiki.

SNTs and Structured Settlements

With declining annuity premium and historically low interest rates, structured settlement stakeholders should be discussing how to improve and grow their business. By substantially expanding Medicaid, Federal health care reform potentially increases the market for structured settlement annuities used to fund special needs trusts (SNTs).

Congress created special needs trusts (self-settled; pooled; and third party) as part of the Omnibus Budget Reconciliation Act of 1993. When properly designed and administered, special needs trusts can receive settlement proceeds, including structured settlement payments, without disqualifying the trust beneficiary from SSI or Medicaid.

Whether a special needs trust is advisable in a specific case requires analysis of many factors including the extent of disability, the availability of government benefits, as well as the nature and amount of available personal and family assets. One complicating factor is shared regulatory authority. Medicaid is a joint federal state program. In addition to two federal agencies (SSA and CMS), state Medicaid agencies and state Medicaid plans also provide state-specific rules for special needs trusts. State and county Medicaid case workers interpret and apply federal and state Medicaid laws to individual cases.

The growth of special needs trusts has coincided with a corresponding increase in the number of special needs attorneys. Three national professional associations (ASNP, SNA and NAELA) now exist for special needs attorneys and several legal textbooks have been written about special needs trusts. Most of these textbooks, however, are generic and do not provide detailed state-specific analysis. One exception is a two volume treatise published in 2008 (with updates) by the California CEB titled "Special Needs Trusts: Planning, Drafting and Administration" (CEB SNT). Edited by Kevin Urbatsch, CEB SNT features 17 chapters separately written by leading California special needs attorneys plus detailed appendices with applicable legal forms plus federal and state statutes, regulations, case citations and other references.

Because California represents a large and strategically important state for both structured settlements and special needs trusts, S2KM recently reviewed CEB SNT to evaluate how this legal treatise addresses structured settlements and what opportunities it suggests for improving and growing the national structured settlement market. Most of the structured settlement discussion in CEB SNT appears under a Chapter 8 section titled "Use of Structured Settlements with First Party SNTs" authored by Donna Bradshaw and Leslie Ann Barnett.

Settlement Planning Team

For personal injury cases involving a special needs trust, Bradshaw and Barnett propose a collaborative settlement planning team consisting of a special needs attorney, a structured settlement broker, a SNT trustee, an independent financial planner and a life care planner. Neither Bradshaw and Barnett, nor other CEB SNT authors discuss this proposed planning team in detail. Arguably, such a discussion goes beyond the scope of this CEB SNT treatise.

The concept of a collaborative professional team, however, is critical for settlement planning and the future of structured settlements. Unfortunately, with only a few exceptions (most notably the ASNP 2009 and the SSP 2011 Annual Conferences both of which featured CEB SNT editor Kevin Urbatsch as a speaker), the following issues have to date received insufficient industry discussion:

• What is a settlement plan?
• Who are the necessary team members and what issues should they address?
• What is the settlement planning role, if any, for the plaintiff trial attorney? for the defense structured settlement broker?
• What work product(s) do each of the team members contribute?
• How are the various work products consolidated and by whom?
• How are conflicting recommendations reconciled and by whom?
• What does a settlement plan cost?
• How are the team members compensated and by whom?
• What disclosures should be made to the injury victim?
• What metrics are needed to evaluate the effectiveness of a settlement plan?
• How important are 468B qualified settlement funds for settlement planning?
• Who is liable, and how are damages apportioned, for settlement planning errors and omissions?

Structured Settlements

In the two volume CEB SNT treatise, structured settlements are the only SNT "funding product" that receives detailed coverage. Chapter 8 authors Bradshaw and Barnett justify devoting 12 CEB SNT subsections to "structured settlements" by stating: "special needs planners need to understand how structured settlements work with first party SNTs to best advise personal injury attorneys, persons with disabilities, and their families."

Acknowledging the need to understand how structured settlements work, however, does not mean Bradshaw and Barnett fully endorse structured settlements. To the contrary, they provide several warnings and cautionary notes:

• "Plaintiff's trial attorney may mistakenly believe (or be misled into believing) that a structured settlement annuity is the only effective tool for the major part of the settlement funds."
• "At times a structured settlement is funded for a person with a disability without consideration of the unique needs to that individual."
• "The most common issue is too much cash in the structured settlement and not enough cash outside the structure."
• "It is insufficient to retain just enough cash to purchase a home and a van; there also must be a financial plan to maintain the home and van and consider replacement costs"
• "When a settlement has been funded primarily in a structured settlement annuity, there is little protection from inflation."
• "Annuities purchased in a time of low interest rates are likely to grossly under perform when compared to a well-balanced portfolio of stocks and bonds."
• "If the SNT beneficiary has an emergency or needs cash quickly, the settlement annuity will not advance payments."
• "It is imperative that practitioners insist on a commutation rider whenever there is a possible estate tax situation."
• "Once the structure is funded, [the structured settlement broker's] job is done. It is then left to the SNT trustee and special needs practitioner to work with the structured settlement for the rest of the person with the disability's life."

Without explicitly criticizing structured settlement business standards and practices, these warnings and cautionary notes highlight structured settlement issues S2KM discussed in a recent blog series about "product suitability standards" including the need for full disclosure and informed consent.

Despite 12 CEB SNT subsections discussing structured settlements, Bradshaw and Barnett barely mention three structured settlement-related topics that are important for special needs attorneys:

• Periodic Payment of Judgments - California was the first state to make periodic payment mandatory in certain (medical malpractice) judgments "at the request of either party". Because California's medical malpractice periodic payment statute also influences settlements that include special needs trusts, California special needs attorneys should be familiar with its provisions.
• Structured Settlement Transfers - Structured settlement transfers represent a strategy option for SNT trustees and special needs attorneys to consider if and when they confront some of the potential structured settlement problems Bradshaw and Barnett identify above. California amended its state structured settlement protection statute in 2010 adding factors for the court to consider when determining whether a proposed transfer is fair, reasonable and in the payee's best interest.
• Qualified Settlement Funds (QFS) - Similar to structured settlement transfers, QSFs are controversial within the structured settlement industry. Arguably underused in single event cases, QSFs provide a valuable settlement planning tool that all special needs attorneys should understand and promote.

Conclusion

For a regressive structured settlement industry, first party special needs trusts represent a growing market segment and special needs attorneys provide expanding networks of potential professional allies. Although CEB SNT focuses on California special needs trusts, the subsections discussing structured settlements offer a useful learning resource for all structured settlement stakeholders. Bottom line: the structured settlement industry needs to expand its strategic dialogue with special needs attorneys. The objectives should include better marketing and product feedback plus improved educational programs, business models and business practices.

For additional information about special needs trusts and structured settlements, see the structured settlement wiki and Section 15.04[7] of "Structured Settlements and Periodic Payment Judgments" (S2P2J).

Structured Settlements in 2011 - 2

In a prior blog post, S2KM highlighted the historic significance of the ELNY liquidation as the dominant 2011 structured settlement industry development. This blog post offers a strategic perspective of the industry's status in 2011 focusing in part on the industry's three national associations and also providing a broader perspective for ELNY.

Strategic Overview - Primary Market

The National Structured Settlement Trade Association (NSSTA) celebrated its 25th anniversary in 2011. Among its 2011 accomplishments, NSSTA noticeably improved its marketing and educational programs while focusing substantial resources to help minimize problems related to the ELNY liquidation. NSSTA has attempted to balance the need to inform its members (not the public) about ELNY's status with the need to promote the strength of its life insurance markets and the state guaranty fund system.

Speaking at NSSTA's 2011 Annual Meeting, Thomas Ronce, Chairman of NOLHGA, described the current life and health guaranty system in the United States as experienced, well-financed and armed with a multitude of optional legal and financial tools. Applied to ELNY, this state guaranty system will substantially improve the recovery for many ELNY structured settlement recipients. The state guaranty system, however, will not make whole every ELNY structured settlement recipient. Unfortunately, even with guaranty fund payments and additional enhancements, many ELNY structured settlement recipients are expected to experience shortfalls.

NSSTA's 2011 Annual Meeting and Fall Educational Conference also showcased the current strength of the structured settlement market and its product providers.

• Jim Morris, President, Chairman and CEO of Pacific Life Insurance Company, accentuated the current financial strength of U.S. life insurance companies generally and explained why structured settlement annuities represent an excellent strategic product for life companies. Confirming Morris' assessment, three new product providers (Mutual of Omaha, National Indemnity and Hartford) entered (or re-entered) the structured settlement marketplace during 2011.
• William T. Robinson III, President of the American Bar Association (ABA) strongly endorsed structured settlements as "professional and dignified solutions" for injury victims based upon his first-hand experience as a litigation attorney. Robinson also suggested the ABA and NSSTA should identify shared interests and lobbying opportunities.
• American General Life President Mary Jane Fortin described AIG, a structured settlement product provider that received more than $180 billion of loans and investments from the United States government in 2008, as "a strong, stable and resilient company dedicated to keeping our promises". Fortin also dispelled several "myths" about AIG, summarized AIG's recovery from the 2008 financial crisis and expressed optimism about the future of life insurance industry and structured settlements.

Despite these positive assurances, however, primary market structured settlement annuity sales have continued to trend downward for the past three years, arguably because of the 2008 financial crisis and historically low interest rates which many experts predict will continue for the foreseeable future. What has been missing from NSSTA's leadership during 2011 has been a positive vision for NSSTA's own future and the future of structured settlements.

David Ringler, NSSTA's first President, spoke during the NSSTA 2011 Annual Meeting. Ringler stated the most important reason for creating NSSTA was "having a place where everyone and anyone can sit down with each other and discuss the issues and viewpoints regardless of beliefs."  Sometime during the past 25 years, NSSTA lost sight of this original vision and now generally excludes industry voices and perspectives that challenge traditional structured settlement business models and practices.

As one result, two additional professional associations have formed with alternative structured settlement perspectives:

• The Society of Settlement Planners (SSP) - SSP espouses the claimant's right to select his or her own structured settlement adviser and funding company. SSP promotes structured settlement annuities as a core product for special needs settlement planning and favors greater utilization of IRC 468B Qualified Settlement Funds (QSFs).
• The National Association of Settlement Purchasers (NASP) - NASP promotes the right of structured settlement recipients, in compliance with federal and state laws, to sell their payment rights provided a state judge approves the sale in advance as being in the "best interest" of the transferor/payee taking into account the welfare and support of the payee's dependents.

To its credit, NSSTA expanded the scope of its educational programs in 2011 to discuss QSFs and to provide its members with more detailed information about structured settlement secondary market. The perspective for these NSSTA discussions, however, remains defensive and protective without any attempt to envision or discuss new business opportunities or product improvements.

By comparison, SSP's vision for the the future of structured settlements is defined and supported by its "Standards of Professional Conduct". SSP views structured settlements as a core product for personal injury settlement planning. SSP's vision agrees with and encompasses the business model Joseph DiGangi introduced to NSSTA in 2009 as "Settlement Consulting" which he characterized as "a wake up call for the industry." SSP's educational conferences continue to push structured settlement industry thinking beyond its historic boundaries and the inevitability of its path dependence.

In addition to SSP, three national legal associations are developing special needs business practices and models that expand the framework and opportunities for structured settlements:

• Academy of Special Needs Planners (ASNP)
• National Academy of Elder Law Attorneys (NAELA)
• Special Needs Alliance (SNA).

Faced with the ELNY crisis, declining annuity sales and the continuing prospect of low interest rates, some primary market structured settlement stakeholders now recognize that business practices and models that made sense in the past may have survived despite the eclipse of their earlier justification.  S2KM believes more primary market stakeholders should expand their strategic perspectives and re-think structured settlements in the context of the changing legal and financial landscape.

For example, here are four 2010 developments with important consequences for structured settlement stakeholders that have heretofore received inadequate primary market educational attention:

• Patient Protection and Affordability Care Act - how does health care reform impact injury victims and what opportunities does it create for structured settlements?
• Dodd-Frank Wall Street Reform and Consumer Protection Act - how will the Consumer Financial Protection Bureau (CFPB) address structured settlement complaints?
• NAIC Suitability in Annuity Transactions Model Regulation - what does "suitability" mean for structured settlement annuities and how does "suitability" differ from the "best interest" standard applicable to trustees, investment advisers and structured settlement transfers?
• Spencer v. Hartford class action settlement - what are the lessons learned and resulting new best practices for structured settlements?

Strategic Overview - Secondary Market

The ELNY liquidation is also having a negative impact on the secondary structured settlement market. Some industry experts have estimated that as many as 1000 of ELNY structured settlement annuities (out of the 4168 total) have undergone transfers of some or all payment rights. Investors who have purchased ELNY annuity payment rights may not be eligible to receive contributions from state guaranty funds which historically protect "consumers". The NYLB's December 7, 2011 letters warned ELNY payees "if you have transferred any part of your right to receive ELNY SSA benefits to a third party, you may not be eligible to receive benefits from CABC related to the benefits you transferred."

Although the financial crisis of 2008 had a devastating short term impact on the structured settlement secondary market, the market has experienced robust sales in 2011 as institutional investors continue to be attracted to the relatively high rates of returns generated by restructured (post transfer) payment right obligations. More individual investors, including personal injury claimants and their attorneys, have also begun purchasing restructured payment rights although some industry experts caution against potential tax and securities law uncertainties.

The structured settlement secondary market changed dramatically in 2011 with the announced merger of  J.G. Wentworth and Peachtree Settlement Funding. The merger combined the two largest purchasers of structured settlement payment rights with an estimated 80-85 percent of the market.

The merger highlights a remarkable turnaround for Wentworth whose shareholders control the majority of the combined companies. In 2009, Wentworth and two affiliated companies entered Chapter 11 bankruptcy protection after the company "encountered liquidity problems amid a tightening credit market". Wentworth laid off 120 of its 200 employees and closed its office in Las Vegas. Its general corporate bonds were "almost worthless" and were trading, if at all, for pennies on the dollar. Less than six months later, Wentworth emerged from bankruptcy with an announcement that JLL Partners (Wentworth's owners) had invested an additional $100 million in the firm.

In a significant case (Symetra v. Rapid Settlements) highlighting controversial business practices which were opposed by NASP as well as structured settlement annuity providers, a Texas court issued injunctions during 2011 prohibiting Rapid Settlement's prior business practices of using arbitration to by-pass state structured settlement protection statutes and taking security interests to gain rights of first refusal for future transfers.

Check the structured settlement wiki for additional S2KM structured settlement reporting:

• ELNY liquidation
• Annual industry reports
• Professional association meetings

ADDENDUM (12/12/2011) - S2KM's report above omits at least one important 2011 strategic structured settlement development. NSSTA and its product provider members launched the first-ever industry metrics study during 2011. For more information about metrics, see S2KM's "Structured Settlement Metrics" series featured on the structured settlement wiki.

New MSP Protocol in New York

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.

CMS (the responsible Federal agency) has established certain basic requirements for workers compensation MSAs (WCMSA) in a series of memoranda beginning in 2001. CMS, however, has not offered any definitive statements about whether or when MSAs are needed to account for future medical expenses in liability settlements.

On May 6, 2011, the United States Attorney's Office for the Western District of New York (USAOWDNY) released a one page "Medicare Secondary Payor Protocol" (MSP Protocol) establishing a voluntary process by which that U.S. Attorney's Office will review MSA proposals for liability cases provided certain conditions are met.

The MSP Protocol issued by USAOWDNY specifically:

• Excludes liability cases involving mass torts;
• Confers no substantive rights;
• May be used or withdrawn at the unilateral discretion of the USAOWDNY;
• Provides a voluntary process; and
• Does not represent a CMS policy.

The MSP Protocol defines an MSA as: "An administrative mechanism used to allocate a portion of a settlement, judgment or award for future medical and/or future prescription drug expenses. A set-aside arrangement may be in the form of a Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA), No-Fault Liability Medicare Set-Aside Arrangement (NFSA) or Liability Medicare Set-Aside Arrangement (LMSA)."

The MSP Protocol requires applications for MSAs in liability cases to be made jointly by the Medicare beneficiary, or his representative, and "the primary plan", presumably meaning the liability insurer or self-insurer, and additionally requires:

• A copy of the MSPRC letter stating the matter concerning repayment for historical medical items and services related to the tort was reviewed and resolved or provide adequate assurance to that effect;
• The proposed LMSA related to the tort;
• An agreed copy of the settlement agreement subject to completion of the MSP obligations;
• A joint statement from the applicants that warrants:
  • The value of the agreed settlement equals or exceeds $350,000.00;
  • The plaintiff is a Medicare beneficiary as defined under 42 C.F.R. §400.202.
  • CMS was requested to approve the LMSA, but no substantive response has been received for at least 60 days from the date of the letter to CMS; and
  • An affidavit from the preparer of the LMSA that it is:
    • True and correct based on the Medicare beneficiary’s medical records and the injuries being released; and
    • In conformance with the WCMSA submission checklist as published by CMS

Subsequent to the application, the USAOWDNY may request additional information from the parties, including a request for an additional LMSA(s). Upon receipt of all required information, the USAOWDNY will issue a Release which will compromise the LMSA obligations related to the settlement, judgment, award or other payment.

For additional S2KM reporting about MSAs and liability cases, see:

• MSAs and Liability Cases - summarizing recent recommendations for MSAs in liability cases issued by NAELA and the ABA.
• MSAs and Liability Cases - 2 - reviewing a new article by Peter Wayne which offers advice to plaintiff attorneys about Medicare compliance in liability cases.

For more detailed information about MSAs and structured settlements, see Section 15.03 of "Structured Settlements and Periodic Payment Judgments" (S2P2J).

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".

Health Care Reform

Health care reform consists of two laws enacted in March of 2010 (the Patient Protection and Affordable Care Act and the Health Care Education and Reconciliation Act of 2010) which will have a profound impact on people with disabilities.

While the Academy of Special Needs Planners (ASNP) and the National Academy of Elder Law Attorneys (NAELA) are providing their members with detailed analyses of health care reform, the structured settlement industry has not yet addressed this historic legislation in their educational programs.

Among the featured speakers at the ASNP 2011 Annual Meeting, Cynthia Barrett discussed how health care reform impacts people with disabilities. Barrett's presentation, accompanied by a detailed written analysis, summarized the new Federal health care legislation and advised ASNP attendees how to adjust their professional practice.

Of special interest to structured settlement and settlement planning professionals, Barrett highlighted and discussed the following questions plaintiff attorneys are most likely to ask about health care reform:

• Will my disabled client be able to get health insurance now?
• For settlement purposes, can future medicals be reduced to estimated lifetime insurance premiums until my client becomes eligible for Medicare or Medicaid?
• Do private health plans have “set-aside” or special needs trust requirements?
• If my client can get private health coverage, will he/she still need public benefits?
• If my client can obtain private health insurance, why do I need a special needs attorney or a special needs trust?
• As a plaintiff attorney, is there anything else I need to know about health care reform or related legislation?

In response to the last question, Barrett identified:

• The Medical Tort Claims Alternatives Demonstration Program which will send $50,000,000 in demonstration grant funds to states (up to $500,000 per state) over five years to develop and implement alternatives to the existing civil litigation system. According to Barrett, these demonstration grants:
  • Focus narrowly on disputes over injuries caused by health care providers or health care organizations;
  • Are intended to showcase medical malpractice alternatives;
  • Will be awarded by the Secretary of Health and Human Services; and
  • Plaintiffs may elect whether to participate, but cannot be required to participate.
• President Obama’s 2011 State of the Union address during which the President suggested he might cooperate with Republicans on medical malpractice tort reform.

Barrett also advised special needs attorneys to:

• Exclude from their services health coverage options advice;
• Screen claimants to determine whether needs-based Medicaid will be important.

NAELA will be devoting the entire Spring 2011 edition of the NAELA Journal to health care reform. Available to NAELA members only, this NAELA health care reform analysis will feature a detailed introduction by NAELA Journal Editor-in-Chief William J. Brisk plus eight articles and a supplement of online resources.

Brisk's introduction addresses why health care reform is "too significant to ignore" and highlights its most important features. His analysis identifies what tort reform actually does and does not accomplish. He emphasizes the important roles Medicare, Medicaid, private health insurance companies and health maintenance organizations will play in implementing health care reform.

Additional NAELA Journal topics and authors:

• Health Care Changes: Challenges to Medicare - Vicki Gottlich, Patricia Nemore, and Alfred J. Chiplin Jr.;
• The New CLASS Act - Morris Klein;
• Nursing Home Regulations - Charles Perez Golbert;
• Health Care Reform’s Impact on Small Businesses and Individuals - Ben A. Neiburger;
• Health Care Reform and End-of-Life Issues - Fay Blix;
• The Affordable Care Act’s Changes to Medicaid’s Coverage for Long-Term Services and Supports - Gene Coffey;
• Health Insurance Reforms: Once In a Lifetime Change or Same as It Ever Was? - Lucinda E. Jesson;
• Medicaid Expansion Under the 2010 Health Care Reform Legislation: The Continuing Evolution of Medicaid’s Central Role in American Health Care - Renée M. Landers and Patrick A. Leeman;
• Online Resources Available to Supplement Health Care Reform Discussion - prepared by Claire DeMarco.

If health care reform is "too significant to ignore" and if health care reform greatly impacts disabled people, why has the structured settlement industry ignored health care reform? Possible reasons:

• Product focus instead of customer focus;
• Circumscribed scope of knowledge;
• Limited strategic thinking or analysis;
• Retrospective and inside-the-box orientation;
• Protect and preserve mentality.

MSAs and Liability Cases

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.

Although their objectives and target audiences are different, the National Academy of Elder Law Attorneys (NAELA) and the American Bar Association (ABA) have each recently issued recommendations addressing MSAs and liability cases.

MSAs are administrative and funding mechanisms utilized in certain categories of settlements to protect Medicare's interests as "secondary payer" under the Medicare Secondary Payer (MSP) statute. MSA objectives include:

• Protecting Medicare from erroneous billings;
• Releasing settlement participants from Medicare liability;
• Providing a settlement-funding vehicle;
• Utilizing Medicare properly to limit settlement costs.

Although Federal law does no define MSAs, or mandate specific types of MSA funding mechanisms, CMS (the responsible federal agency) has established certain basic requirements for workers compensation MSAs (WCMSA) in a series of memoranda beginning in 2001:

• Maintain an interest-bearing account;
• Reimburse Medicare provider bills at appropriate fee schedules for Medicare allowable services;
• Submit an annual accounting of expenses to the lead CMS contractor.

In addition, the CMS WCMSA memoranda create both an advantage and a problem for using structured settlements to fund WCMSAs:

• October 15, 2004 Memorandum - CMS sets forth a "set-off" method for calculating present value that establishes an inherent cost advantage for annuity funding as opposed to lump sum funding for many WCMSAs.
• August 20, 2008 Memorandum - CMS encourages the submission of annuity quotes with rated ages to establish life expectancy with requirements that have proven burdensome for both structured settlement consultants and annuity providers.

Meanwhile, the Medicare, Medicaid and SCHIP Extension Act of 2007 (MMSEA) requires liability insurers to determine the Medicare status for all claimants and to report all claims involving a Medicare beneficiary to CMS when those claims are resolved - or face a civil penalty of $1000 per day per unreported claim.

• On November 9, 2010, CMS delayed the submission deadline for liability insurance claim reports from the first calendar quarter of 2011 to the first quarter of 2012.
• MMSEA does not address the need for MSAs in liability cases and CMS has not offered any related uniform or formal guidance.

Within this confusing legal environment, where liability insurers and attorneys must still decide how best to comply with the MSP act in liability cases without over-reacting and establishing an MSA unnecessarily, NAELA and the ABA have each issued recent recommendations.

NAELA published its recommendations on October 27, 2010 as part of a Medicare Set-Aside Task Force Report approved by NAELA's Board of Directors. In addition to recommendations, the NAELA Task Force Report includes findings and legal resources. NAELA's recommendations are intended for special needs and elder law attorneys handling personal injury settlements involving the MSP program and include two caveats:

• "The requirement for future medical expenses set-asides in tort cases is not as clear as it is in WC cases"; and
• "Some Medicare regional offices will not consider MSP set-asides in tort cases. Cases in which the above advice should be communicated to clients should be limited to those cases with large settlement/awards based on specific estimates and evidence of the costs of future medical services."

S2KM summary of NAELA's recommendations:

• Document any advice and counseling about the appropriateness of MSAs for specific cases.
• Advise personal injury (PI) clients to set-aside an equivalent amount of funds for future Medicare-related medical expenses in a self administered MSA.
• Warn PI clients that the Medicare Secondary Payer Act (MSP) applies to all tort settlements and that CMS considers PI plaintiffs to have an obligation to protect Medicare's interests in coordinating future benefits.
• Advise PI clients to consider MSAs with applications for approval to CMS in cases with large settlement/awards based on specific estimates and evidence of the costs of future medical services.
• Be mindful under state law of an attorney's duty to protect a client’s liability recovery from incorrect claims and unnecessary charges.
• The NAELA Public Policy Committee and Medicare Task Force should continue:
  • Dialogue about MSAs with appropriate CMS officials;
  • Educating NAELA members about MSAs through NAELA publications; and
  • Communicating NAELA’s position on MSAs to appropriate PI lawyer trade associations.

Unlike NAELA, the ABA recommendations, approved during the ABA's 2011 Midyear Meeting, are addressed to the United States Congress and urge Congress to amend the MSP Act. The ABA recommendations resulted from resolutions adopted by the ABA's Tort Trial and Insurance Practice Section (TIPS) which also included a list of historical findings:

• "RESOLVED, That the American Bar Association urges Congress to acknowledge that there is no regulatory or statutory basis for Medical Set Asides for third party liability settlements, judgments or awards under the Medicare Secondary Payer Act and provide clear, predictable, and consistent procedures for the submission, uniform determination, and timely approval of any third party medical set aside settlement proposals (MSASP) voluntarily submitted to the Centers for Medicare & Medicaid Services (CMS) in response to the non-binding recommendations of CMS.
• "FURTHER RESOLVED, that legislation to accomplish these goals should incorporate the following principles:
  1. Acknowledge that there are not statutory and regulatory requirements for determining Medical Set Aside payments and the process for approving claims subject to the Medicare Secondary Payer Act for third party liability claims.
  2. Exempt from review by CMS all settlements in which there are no legal obligations to pay medical benefits.
  3. Establish an appeals process that must be completed by CMS within 690 days of request by the claimant, insurer, or their representative.
  4. Prohibit CMS from seeking additional moneys from the settlement proceeds after review and/or appeals processes have been concluded.
  5. Prohibit recovery thresholds for MSASP that are linked to predetermined economic indices.
  6. Prohibit recovery thresholds for MSASP that are linked to predetermined economic indices.
  7. Establish a 30 day deadline by which CMS must respond in writing of its acceptance of the proposed MSASP.
  8. Require CMS to timely (“timely” means within 60 days the information must be delivered to the patient and patient’s lawyers) and reasonably provide a detailed list of any payments it made and/or may make a claim for set aside for, and if it does not, cannot collect or require a set aside for that patient.
  9. Prohibit the “certification” or claim of specialization by any private individual or person or government entity of a process, practice or individual in the determination of MSASP.
  10. Prohibit the use of Social Security numbers and Health Card Numbers in the MSASP reporting process."

For additional analysis of MSAs, MMSEA and the MSP Act, see Chapter 15 in "Structured Settlements and Periodic Payment Judgments".

ASNP 2011 Annual Meeting

The Academy of Special Needs Planners (ASNP) hosted its Fifth Annual Conference March 11-12, 2011 in San Francisco. Co-chaired by Kevin Urbatsch and Michael Gilfix, the 2011 ASNP conference highlighted a growing knowledge gap between traditional structured settlement consultants (many of whom aspire to be settlement planners) and special needs attorneys (whose professional focus increasing includes settlement planning).

ASNP is one of three national associations of attorneys, the others being the Special Needs Alliance (SNA) and the National Academy of Elder Law Attorneys (NAELA), whose members engage in special needs planning. The primary difference between special needs planning and settlement planning is that special needs planning includes clients whose disabilities result from many causes including but not limited to personal injury or workers compensation accidents.

Beyond the quality of speakers and value of topics, ASNP conferences provide exceptional educational experiences for three additional reasons:

• Handout materials - Whereas most speakers at structured settlement conferences provide attendees with a power point handout or no written handout, most ASNP speakers provide attendees with original, topic-specific professional papers (in addition to outlines and/or power points) captured on a digital thumb drive.
• Sponsors and Exhibitors - Among the several national conferences S2KM attends, ASNP and NAMSAP provide the best interaction among sponsors, exhibitors and attendees. ASNP's interaction includes designated breaks when attendees are encouraged to meet with sponsors and exhibitors as well as designated tables for sponsors and exhibitors during lunch to promote extended and focused discussions.
• Knowledge of Attendees - Because ASNP conference attendees are special needs attorneys who already share a relatively high level of common professional knowledge, ASNP speakers have the freedom to expand the collective knowledge domain of attendees rather than merely reinforce existing shared knowledge.

ASNP's 2011 Speakers and Highlights

• Vincent Russo - Alternatives to Special Needs Trusts - Russo, one of ASNP's founders, highlighted planning uncertainties that justify consideration of alternative special needs strategies. In the context of such uncertainties, including life expectancies plus changes in Medicaid and estate tax laws, Russo utilized videotaped case examples to discuss several alternatives to SNTs.
• Robert Wood - Qualified Settlement Funds - Wood is a frequent speaker at structured settlement and settlement planning events. His ASNP presentation addressed single claimant QSFs and attorney fee QSFs including bad fact patterns, abusive cases and alternative definitions for "multiple claimants". Wood also discussed practical QSF issues such as the termination process, what to do with left-over assets and QSF administrative costs. Except for abusive cases, Wood believes the IRS actually likes QSFs.
• Rafael Gonzales - MSAs and Special Needs Planning - Gonzales' presentation addressed mandatory insurer reporting, conditional payments and Medicare set-aside arrangements. MSA's have become a frequent topic at almost every structured settlement and settlement planning conference - and with good reason given the many and frequent new developments. Gonzales' presentation featured summaries of the most recent case law, regulatory developments and legislative proposals.
• David Lillesand - SSI Update - Lillesand's annual Social Security Income summary for ASNP included detailed analysis of Social Security Regional Chief Counsel precedents for 2009 and 2010 some of which impact structured settlements used to fund SNTs. Lillesand also highlighted three new POMs for SNTs. Based upon his review of recent Social Security rulings, Lillesand identified a potential new issue for attorneys - expanded circumstances when legal fees are subject to Social Security approval.
• Patricia Dudek - Creative Housing Solutions - Although disabled persons historically have had few options for home ownership, home ownership is now a more realistic possibility according to Dudek. Her presentation summarized existing federal housing programs as well as financial and legal strategies for achieving home ownership for persons with disabilities.
• Cynthia Barrett - How Health Care Reform Impacts Persons with Disabilities - Barrett's discussion summarized the new Federal health care legislation and advised ASNP attendees about how to adjust their professional practice. Of special interest to structured settlement and settlement planning professionals, Barrett highlighted and discussed the questions plaintiff attorneys are most likely to ask about health care reform.
• David Foster Koth and Gregory Finn - Selecting Corporate Trustees - Among the many issues discussed during this presentation, the portion addressing structured settlement issues was among the best and most interesting. In the context of allocating trust investments among different financial vehicles, the co-presenters provided a balanced perspective on the advantages and disadvantages of structured settlements as well as the role of the secondary structured settlement market.
• Ruth Phelps - Community Funded SNTs - When a community establishes a special needs trust, several important planning considerations exist. Phelps used a case example to discuss these issues and offer a model planning solution.
• Professor Hank Greely - Diagnostic Genetic Testing - Greely, a leading expert on health law and the biosciences, summarized recent genetic testing developments including the impact of genetic testing for civil litigation (future medical costs) and insurance (age ratings).
• Michelle Ward - IRA Tax Planning - Ward provided a detailed analysis of IRA taxation focusing on distribution options and existing Federal regulations under IRC § 401(A)(9)..

Congratulations to ASNP for another outstanding educational program.

For S2KM reporting about past ASNP conferences and other settlement planning and structured settlement professional associations, see S2KM's structured settlement wiki.

Structured Settlements in 2010 - 2

Beginning in 2004, S2KM has utilized this blog ("Beyond Structured Settlements") and related web 2.0 publications to report and analyze strategic developments impacting the structured settlement and special needs settlement planning (aka settlement consulting) industries.

Featuring industry leaders, commentators and professional association conferences, S2KM has attempted to highlight how legal and technology changes are redefining the traditional (pre-2001) structured settlement market including structured settlement public policy as well as structured settlement business standards, business practices and business models.

From S2KM's perspective, the following categories, people and developments defined the structured settlement and special needs settlement planning industries in 2010:

Professional associations

• S2KM attended seven professional educational conferences during 2010 which addressed structured settlement and/or special needs settlement planning issues:
  • National Structured Settlement Trade Association (NSSTA) - 2
  • Society of Settlement Planners (SSP)
  • National Association of Settlement Purchasers (NASP)
  • National Alliance of Medicare Set-Aside Professionals (NAMSAP)
  • National Academy of Elder Law Attorneys (NAELA)
  • Academy of Special Needs Planners (ASNP)
• As a general observation, all of these conferences were valuable and complementary. For S2KM's 2010 (plus historical) conference reports, see S2KM's structured settlement wiki.
• SSP, NASP and NAMSAP deserve special recognition for their 2010 strategic educational discussions featuring industry leaders, commentators and critics who offered alternative perspectives for improving and growing the structured settlement and special needs settlement planning markets.
• By comparison, NSSTA remains reluctant to openly discuss strategic industry issues or to include alternative perspectives in their educational programs. More positively, NSSTA representatives and members increasingly attend and speak at non-NSSTA structured settlement and special needs settlement planning conferences.
• NAELA's educational conferences are noteworthy because they regularly feature sections or entire programs titled "unprograms". NAELA's unprograms are moderated group discussions about specific topics. NAELA's 2010 Special Needs Summit included six separate one hour unprograms with a concluding unprogram wrap-up session. One example of a 2010 NAELA unprogram was titled "Collaboration Opportunities for Special Needs Attorneys and Financial Planners".

Industry leaders

• NSSTA promoted Eric Vaughn, who previously served as NSSTA's lobbyist, to replace Joseph Ricci as NSSTA's new Executive Director effective July 1, 2010. Peter Arnold, previously NSSTA's Marketing Director, was similarly promoted to serve as NSSTA's Associate Executive Director. NSSTA's Board of Directors elected Michael Kelly as its 2010 President and Dan Finn as its President-elect. NSSTA honored Congressman Peter Stark during its Annual Meeting as its 2010 Legislator of the Year. NSSTA also gave special recognition to Karen Meyers and Joseph Bornstein for their contributions to NSSTA's CSSC and NSSTAPAC programs respectively..
• SSP elected Jason Lazarus as its President for 2010-11 and Charles Schell as Vice President. SSP honored Richard Risk with the designation of "life member" for his contributions to SSP and the settlement planning industry. Joseph Tombs continues as Director of SSP's RSP certification program.
• NASP named Matthew Bracy as its new President succeeding Robin Shapiro. Earl Nesbitt continues as NASP's Executive Director.
• NAMSAP elected Michael Westcott as its President.
• NAELA honored Dick Traum as the first recipient of NAELA's Special Needs Leadership Award. Traum is the founder and CEO of Achilles International, a non-profit organization providing community support for athletes with disabilities with members in more than 70 countries.
• Amy Palmiero-Winters, ultra-marathoner and lower-leg amputee, was named during 2010 as the winner of the 2009 James E. Sullivan Award given annually to the top amateur athlete in the United States.

Industry commentators

• For the past several years, Robert Wood has been the preeminent tax commentator and author for the structured settlement and settlement planning industries. Wood's publications appear on the Wood & Porter website.
• During 2010, Jeremy Babener emerged as an important new structured settlement tax commentator and author specializing in public policy and proposing an expanded structured settlement tax subsidy. In addition to authoring several structured settlement articles for tax and legal journals, Babener participated as a featured speaker at both the SSP and NASP 2010 Annual Meetings and authored two blog posts for S2KM during 2010. Babener discussed his structured settlement writing (accessible on S2KM's structured settlement public policy wiki and Babener's Tax Structuring website) in this 2010 S2KM interview.
• Additional authors who wrote and published 2010 legal articles about structured settlement and special needs settlement planning issues included: Daniel Hindert, Matt Garretson, Sylvius von Saucken, Peter Wayne, Mark Popolizio, Gregg Polsky and Brant Hellwig.
• Both the Legal Broadcast Network and Ringler Radio continued to produce and distribute podcasts featuring structured settlement commentators during 2010.
• An increasing number of structured settlement and special needs settlement planning professionals published blogs during 2010 joining industry blogging pioneers such as John Darer, Mark Wahlstrom, Matthew Bracy and Jack Meligan.
• Incisive Media published two new updates (Release 47 and Release 48) for "Structured Settlements and Periodic Payment Judgments" during 2010.

Legislation

• Both the Patient Protection and Affordable Care Act (Health Care Reform) and the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) redesign the legal environment in which the structured settlement and personal injury settlement planning markets operate.
• Among the anticipated strategic consequences of health care reform:
  • An estimated 16 million more Medicaid participants - and therefore:
  • More special needs trusts;
  • More special needs attorneys;
  • More structured settlement annuities payable to trustees.
• Dodd-Frank re-writes federal banking law and creates a new Bureau of Consumer Financial Protection. A key question, as yet unanswered, is whether the sale and/or purchase of structured settlement annuities constitutes a "financial product or service" under Dodd-Frank requiring regulatory supervision by the Bureau.

Regulations

• The United States Department of Treasury held a public hearing on February 23, 2010 focused on proposed new regulations for Internal Revenue Code section 104(a)(2). The proposed regulations, if enacted, would:
  • Eliminate the requirement that damages be based on “tort or tort type rights” in order to qualify for the section 104(a)(2) tax exclusion, and
  • Incorporate 1996 legislation requiring that personal injuries and sickness damages be “physical” in order to qualify for the section 104(a)(2) tax exclusion.
  • A subsequent S2KM interview featured John McCullough and Richard Risk, two of the structured settlement industry members who spoke at the hearing.
• The Centers for Medicare and Medicaid Services (CMS) continued to issue administrative guidance during 2010 for enforcement of the Medicare Secondary Payer (MSP) Act of 1980 and the Medicare, Medicaid and SCHIP Extension Act of 2007 (MMSEA) reporting requirements for insurers. Featured discussions during the NAMSAP 2010 Annual meeting highlighted:
  • The increasing importance and complexity of the MSP statute for all personal injury stakeholders;
  • The need for these personal injury stakeholders (and their professional associations) to cooperate politically and educationally;
  • The challenges of integrating structured settlements, including rated ages, with Medicare set-aside arrangements (MSAs) in the context of health care reform, CMS MSA regulations and related judicial rulings;
  • The evolving business models, claim management strategies and professional skill sets which are now emerging to address these challenges.

Case law

• The Spencer v. Hartford class action lawsuit which settled in 2010 represents one of the most important legal developments in the history of the structured settlement industry.
• Hartford's gross settlement payment of $72.5 million represents 4.5% of total premium dollars Hartford used to purchase structured settlement annuities for class members from January 1, 1997 to June 7, 2010.
• Among the plaintiffs allegations:
  • Hartford and its attorneys, brokers and agents violated the Racketeer Influenced and Corrupt Organizations Act (RICO) and committed common law fraud in structuring its settlements.
  • Hartford's structured settlements were priced so Hartford retained 15% of the value of the structured settlements.
  • Hartford and its attorneys, brokers and agents misrepresented structured settlements including explicit or implicit reference to:
    • The "cost" of the annuity or structured settlement or portion of the settlement being structured; and/or
    • The "value" of the annuity or structured settlement or portion of the settlement being structured.
• Hartford, which stopped writing new structured settlement business in 2009, denied the allegations.

Technology

• Despite the accelerating technology advances revolutionizing society generally, the structured settlement and special needs settlement planning industries have been slow to study and incorporate these advances into their educational programs and business models.
• The best industry-sponsored technology education programs during 2010 were offered by Mark Miller during a NAELA webinar and Harry Margolis at the ASNP 2010 Annual Meeting. Both presentations provided introductory overviews of web 2.0 and including recommendations for integrating specific social networking tools into special needs legal practices.
• NSSTA initiated a NSSTA blog during 2010 and offered an educational program about Internet marketing during its 2010 Fall Education program.

Public policy

• Both SSP and NASP featured specific discussions and presentations about structured settlement public policy during their 2010 Annual Meetings. The discussions included industry commentators representing diverse viewpoints and priorities.
• Jeremy Babener followed his 2009 paper debunking industry myths concerning "structured settlement dissipation studies" with several 2010 articles and papers addressing structured settlement public policy issues. Babener's public policy writing is featured on S2KM's structured settlement public policy wiki.
• Release 47 of "Structured Settlements and Periodic Payment Judgments" re-examined several structured settlement public policy issues related to single claimant 468B funds, structured settlement factoring transactions, dissipation by personal injury victims, the Deficit Reduction Act of 2005, special needs trusts and Medicare set-aside arrangements.
• In a 2010 Boston College Law Review article, professors Gregg Polsky and Brant Hellwig challenged the application of any structured settlement tax benefit for deferring attorney fees or payments to non-physically injured tort plaintiffs under general common law tax principles.

Business standards and practices

• The Spencer v. Hartford case raises many issues about structured settlement business standards and practices which require greater education and analysis if the primary market expects to improve and grow. For example;
  • Is the primary structured settlement market capable of self-regulation?
  • Why shouldn't key elements of the state structured settlement protection statutes (judicial approval; best interest test; compensation disclosure) be applied to primary market transactions?
  • As an additional requirement, or as an alternative, why haven't plaintiff attorneys and plaintiff consultants insisted upon a claimant's written informed consent before entering into a structured settlement?
  • Why haven't the SSP's Standards of Professional Conduct received more public discussion and analysis within the structured settlement industry?
• "Cash now" advertising represents one of the most highly criticized secondary market business practices. Although this practice continues to exist, NASP took an important educational step during its 2010 Annual Meeting by highlighting this issue and inviting secondary market critics to participate in the discussion.

Business models

• While other segments of, and products within, the special needs settlement planning market have expanded and improved in recent years, the structured settlement primary market in general has stagnated and retrenched.
• During 2010, however, representatives of the primary structured settlement market increasingly recognized their interdependency, and interacted, with other settlement planning professionals and professional associations such as special needs attorneys, life care planners, Medicare set-aside professionals and secondary structured settlement market participants.
• Future industry improvement and growth will require even greater appreciation and identification of shared interests as well as expanded implementation of shared political strategies, educational programs and business models.

Prior S2KM annual reports about the structured settlement industry and reports about industry association conferences are available on S2KM's structured settlement wiki.

NSSTA and NASP 2010 Educational Conferences -1

There are three leading structured settlement professional associations:

• NSSTA (The National Structured Settlement Trade Association)
• SSP (The Society of Settlement Planners)
• NASP (National Association of Settlement Purchasers)

And several affiliated national structured settlement stakeholder associations. These include:

• NAELA (Natonal Academy of Elder Law Attorneys)
• NAMSAP (National Alliance of Medicare Set-Aside Professionals)
• AAJ - (American Association for Justice)
• ASNP - (Academy of Special Needs Planners)

Both NSSTA and NASP have announced simultaneous structured settlement educational programs in Las Vegas, Nevada for November 10-12, 2010.

This strategic coincidence provides an important opportunity for structured settlement participants, knowledge experts, stakeholders and industry analysts to evaluate and discuss the current status of the structured settlement industry.

Among other featured speakers at the NASP conference, Pat Hindert will join fellow bloggers John Darer and Matt Bracy to highlight and discuss the most important structured settlement industry issues. In addition to S2KM commentary, check John's blog and Matt's blog for further discussion and commentary.

Here is S2KM's preliminary list of the most important structured settlement industry issues:

• The Internet - whether, when and how will the structured settlement industry transition its knowledge and business models to web 2.0 technologies?
• Settlement consulting - whether, when and how will the structured settlement industry address (and hopefully embrace) a broader professional perspective to incorporate settlement consulting?
• Regulation - whether the structured settlement industry is capable of self-regulation and how best to regulate the structured settlement industry?
• Government benefits - how best to integrate structured settlements with other government benefits?
• Secondary market - how best to integrate the secondary market to improve structured settlements?
• Insolvencies - how will the structured settlement industry address the upcoming Executive Life of New York (ELNY) insolvency?
• Business standards and practices - what did the structured settlement industry learn from the Spencer v. Hartford case?

For additional S2KM reporting about structured settlement professional associations, see S2KM's structured settlement wiki.

For additional S2KM commentary about 2010 strategic structured settlement issues, see S2KM's related blog reporting.