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Policy at the Social Security Administration (SSA), provided a "Social Security Update" during which he reconfirmed an unpublished SSA position supporting what Reixach reported - i.e. the SSA believes the existence of the secondary market renders structured settlement annuities "available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.

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 - 4

The National Association of Settlement Purchasers (NASP) just raised the standard for structured settlement strategic discussion and analysis during its 2010 educational conference in Las Vegas.

Previous standards: the 2008 Structured Settlement Thought Leadership Conference and NASP's 2009 Annual Meeting.

NASP 2010 strategic anlaysis participants: Earl Nesbitt (NASP Executive Director and moderator); Peter Vodola (Co-Chairman of the NSSTA Legal Committee); Matthew Bracy (President of NASP); Craig Lessner (General Counsel of Peachtree); John Darer and Patrick Hindert (NSSTA members and industry bloggers); Richard Risk (SSP member); and Jeremy Babener and Tim Morbach (industry analysts).

Strategic Questions: Nesbitt challenged the NASP panel and launched the industry discussion with these strategic structured settlement questions:

• What has caused the decline in the primary structured settlement market?
• What steps has the primary market taken to improve its product and sales?
• Is the structured settlement market transitioning to a settlement planning model?
• If yes, what impact will this transition have for the primary and secondary market?
• What issues and problems does the primary market see with the secondary market:
  • Operating and administering their current portfolio?
  • Originating new business?
  • Administrative costs?
  • Complying with transfer orders?
  • Potential liabilities?
  • Beneficiary issues?
• How can the secondary market help improve and grow the primary market?
• How can the primary market improve the secondary market?
• What are the risks of a continuing adversarial relationship between the primary and secondary markets?
• How does the primary market view the positive secondary market recovery from the 2008 financial market collapse?
• What are the primary market annuity provider concerns with the secondary markets?
• How can the secondary markets help improve and grow the primary market?
• How can the primary market improve the secondary market?
• What are the risks if the relationship between the primary and secondary markets remains adversarial?
• How did the 2008 collapse of the capital markets impact the primary structured settlement market?

This S2KM blog post continues S2KM's reporting and analysis of the NSSTA and NASP 2010 educational conferences.

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.

25 Questions to Evaluate Pooled Trusts

Health care reform (Patient Protection and Affordable Care Act), enacted on March 23, 2010, has re-defined the structured settlement and personal injury settlement consulting marketplace: whether current participants realize it - or (more probably) do not.

Among the 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.

Without focusing specifically on health care reform (not then enacted), the ASNP 2010 Annual Meeting included valuable presentations and handout resources indirectly related to health care reform, structured settlements and settlement planning/consulting.

Among those valuable presentations was Evan J. Krame's analysis titled "Not Very Special Trusts: Fixing Trusts to be Special and Using Pooled Trusts". As part of his ASNP trust analysis, Krame introduced a document he wrote titled "25 Questions to Evaluate Pooled Trusts".

In addition to his legal practice and teaching activities, Krame serves as President of Shared Horizons, Inc. Shared Horizons is trustee of the Wesley Vinner Memorial Trust (a pooled trust) serving people with disabilities in the District of Columbia and Maryland.

Krame has granted permission for S2KM to re-publish his list of 25 Questions here in S2KM blog format.

Trust Structures

• Check the Trust Agreement and Joinder Agreement? What do the documents say? For example, what powers does the trustee have?
• Is the trust approved and monitored by any state agencies?
• Who/what is really serving as the trustee? Is it the non-profit organization that created the trust or is it a third party hired to administer the trust?

Is this Trust Right for You?

• What are the costs of participation? Is there an initiation fee, an annual fee or a termination fee?
• How are the disbursements approved? What is the ease and method of disbursements? Who signs disbursement checks?
• What is the availability of advocacy on behalf of the beneficiary?
• How do they manage public benefit issues?
• How do they monitor the beneficiaries?
• Will the trust own illiquid or uncommon assets such as cars or homes?

Trust Management

• What is the reputation of the non-profit and/or trust management organizations?
• What is the organizational structure? Check on staff, space and activities.
• Who are the officers of the non-profit? What are their skills and background?
• What is the function of the board of the non-profit trustee?
• How long has the trust been in existence? Is there any reason to believe it could fail? How appropriately is the pooled trust compensated?
• How are the trust assets invested? Is there an investment policy in force that is followed? Is there an independent investment adviser? Is there an investment review committee? Is there an allocation model?
• How do they maintain separate shares? Do they uphold the duty to segregate?
• Is there liability and casualty insurance in place?
• How do they meet their duty to inform? Are statements provided to beneficiaries and state agencies (as required)?
• How do they meet their duty to account?
• How do they maintain their records? Are they precise, complete and accurate?
• How do they meet their duty of confidentiality?
• Do they have and/or employ legal counsel?
• Are there termination procedures in place?
• What is the policy as to funds at the death of a beneficiary?
• How do they handle income tax reporting?

Additional S2KM resources about settlement trusts:

• Settlement trusts re-visited
• Settlement trusts
• Single claimant 468B funds
• Selecting a settlement trustee
• Settlement trust due diligence
• Special Needs Trusts X
• Richard Halpern