Beyond Structured Settlements

S2P2J Release 57 Highlights

The United States structured settlement market has been in existence for more than 35 years and continues to expand its scope, complexity and importance within the context of personal injury settlement planning.

Since it was first published in 1986, "Structured Settlements and Periodic Payment Judgments" (S2P2J), has provided structured settlement stakeholders with an authoritative reference guide, consisting of 16 chapters with extensive footnotes and Appendix documents, to help them understand issues and fashion settlements and judgments utilizing periodic payments. Both the National Structured Settlement Trade Association (NSSTA) and the Society of Settlement Planners (SSP) have utilized S2P2J as an educational resource for their certification programs.

Co-authored and updated semi-annually by Daniel W. Hindert, Joseph J. Dehner and Patrick J. Hindert, S2P2J now features an online version as well as the traditional hardcopy. Online S2P2J includes a search feature and download capability as well as link features to access individual book sections, appendices, footnotes, cases and statutes.

Publisher Law Journal Press anticipates a March 2015 distribution date for hardcopy supplements for S2P2J Release 57 with online S2P2J subcribers receiving their update simultaneously with no additional subscription charge. Competent professionals confronted by structured settlement issues should have access to an up-to-date copy (or the online version) of this indispensable source book.

Release 57 Highlights - Release 57 will feature new, updated and/or expanded sections addressing the following structured settlement topics:

• WCMSAs - Release 57 re-positions and expands S2P2J's extensive summary of the new CMS rules for workers compensation Medicare set-asides, the fastest growing segment of the structured settlement primary market. Regulatory rules for liability MSAs remain essentially unchanged following the withdrawl by CMS on August 8, 2014 of it the liability MSA-related NPRM it had earlier submitted to the Office of Management and Budget.
• Indexed Annuities - PLR 143928-13 highlights the potential importance of indexed annuities and annuity riders as structured settlement funding alternatives. Release 57 features a new section explaining indexed annuities, differentiating variable annuities and summarizing the related PLR.
• Commutation Riders - PLR 143928-13 also provided favorable tax treatment for a commutation rider pursuant to a Notice of Hardship Conversion as a potential alternative to factoring transactions. This PLR justified an expansion in Release 57 of S2P2J's current section discussing commutations.
• Non-qualified Assignments - Most non-qualified assignments depend upon off-shore assignment companies which raise tax and security issues for participants. Release 57 expands S2P2P's analysis of non-qualified assignments to address these issues.
• CLM Advisors Surveys - Release 57 summarizes results from two surveys commissioned by NSSTA to determine the value claims executives and adjustors place on structured settlements and structured settlement consultants. The results and related metrics are generally favorable and arguably provide a valuable marketing blueprint for defense brokers.
• ABLE Accounts - Release 57 features a new section describing ABLE Accounts, a tax-preferenced funding option authorized by the Achieving a Better Life Experience Act (ABLE Act) of 2014. Although some structured settlement consultants view ABLE Accounts as a competitive product, others see opportunities to fund ABLE accounts using structured settlements.
• Insurance Regulation - States historically have regulated insurance in the United States. As a result of the 2008 global financial crisis, however, new federal and international insurance regulatory agencies now exist which are targeting some of the largest structured settlement annuity providers among other financial and insurance companies. Release 57 adds a new section to introduce and explain these new regulatory developments and entities.
• ELNY and Reliance - The recent ELNY and Reliance liquidations have each impacted thousands of structured settlement recipients. Although judicial solutions have been fashioned, litigation continues - as least involving some ELNY shortfall payees. Release 57 updates S2P2J's extensive coverage of the ELNY and Reliance liquidations.
• Role of Plaintiff Attorneys - As structure settlements and personal injury settlement planning have become more complex, and plaintiff attorneys increasingly require the services of other settlement planning professionals, plaintiff attorneys should continue to perform certain essential structured settlement and settlement planning roles. Release 57 identifies and discusses those roles and provides additional related advice for plaintiff attorneys.
• Secondary Market Update - The continuing expansion of the secondary market has generated controversy and litigation as well as legislative reform and changing business practices. S2P2J continues to track these developments in expanding chapter 16 titled "Transfers of Structured Settlement Payment Rights". Release 57 highlights include "anti-assignment" issues in Illinois originating with the Brenston case and the market "chaos" some secondary market participant see occurring as the result of the Washington Square v. RSL Funding case.
• IRC 104(a)(2) Treasury Regulations - Recent U.S. Treasury Regulations for IRC 104(a)(2) relating to the exclusion from gross income for amounts received on account of personal physical injuries or physical sickness make two primary changes to the current regulations which Release 57 summarizes in the context of S2P2J more extensive analysis in Chapter 2 of "Taxation of Damages Received by the Claimant".

For related S2KM blog reporting about structured settlement 2014 developments, see:

• Primary market
• Secondary market
• Settlement planning
• ELNY and Reliance

 

NAMSAP 2015 Winter Regional Conference

Medicare compliance continues to create "confusion, misinformation and disagreement" among defendants, their insurers and advisors according to speakers at the 2015 Winter Regional Conference hosted by the National Alliance of Medicare Set-Aside Professionals (NAMSAP) January 29 in Orlando.

NAMSAP is "the only non-profit association exclusively addressing the issues and challenges of the Medicare Secondary Payer Statute and its impact on workers’ compensation and liability settlements".

NAMSAP's membership is the most professionally diverse of any U.S. settlement planning association and includes a mix of attorneys, Medicare Secondary Payer (MSP) consultants, CPAs, claims adjustors, structured settlement consultants, guardians, nurses, pharmacists, rehabilitation professionals, and life care planners.

The claims environment has changed dramatically and become much more complex, according to multiple NAMSAP speakers who focused their presentations on issues that arise when Medicare is involved in a case.

Medicare issues are complicated for defendants by adjustor turnover, the need for Medicare education and the comprehensive liability defendants face if Medicare is not protected. Medicare compliance, therefore, is not just about preparing a good Medicare set-aside (MSA). It is about complying with the Medicare Secondary Payer (MSP) statute.

The MSP statute, as amended by the SMART Act in 2013, has three compliance components (past reimbursement; present reporting; and future protecting) which one of the NAMSAP panels succinctly summarized. The greatest confusion for plaintiffs and defendants relates to protecting Medicare's interest in the future. One speaker compared the current situation to the "wild west" and several speakers emphasized "it is all about the data".

Focusing most of its compact program on MSP compliance, NAMSAP's Educational Committee successfully presented multiple complex topics and developments effectively utilizing a case study methodology to advise attendees on issues they can expect to confront in their own case files.

WCMSAs - Structured Settlements

For workers compensation (WC) cases, CMS (the responsible administrative agency) has published both a WCMSA Reference Guide and a WCMSA Self-Administration Toolkit - each of which features extensive rules for structured settlements.

WCMSAs have become an increasingly important submarket for structured settlements. S2KM has previously estimated that as much as eight (8%) percent of recent structured settlement premium and 24 percent of recent structured settlement annuities are attributable to WCMSAs.

In the WCMSA context, structured settlements have one primary advantage (lower cost), which (from a defense perspective) outweighs their one primary disadvantage (administrative complexity), compared with cash. The cost advantage results from one CMS policy memorandum (dated: October 15, 2004) which sets forth the CMS "set-off" approach for calculating present value.

The CMS "set-off" approach ignores inflation and discount rates. Annuities, however, incorporate their own discount rates and therefore produce an inherently lower comparable cost for funding future periodic payments. The CMS WCMSA Reference Guide specifically "follows all" of CMS' previously published memoranda and thereby (apparently) maintains the WCMSA pricing advantage for structured settlements.

Following NAMSAP's previous "Take the Hill" Washington D.C. lobbying success, NAMSAP's 2015 political agenda seeks federal legislation to address perceived CMS WCMSA deficiencies:

• Thresholds result in incomplete protection.
• No direct right of appeal exists.
• Review time-lines are uncertain.
• CMS rules ignore state workers compensation laws.
• CMS assumes all settlements are “commutations”.

NAMSAP anticipates two alternative MSP legislative proposals will be re-introduced in the U.S. House of Representatives (H.R. 1982) and Senate (S. 2731) in 2015

Liability MSAs - CMS-6047-ANPRM

Unlike WCMSAs, almost no regulatory authority exists for MSAs in third party liability settlements. In 2012, pursuant to the Administrative Procedures Act, CMS sent to the Office of Management and Budget (OMB) and published in the Federal Register seeking public comment an Advanced Notice of Proposed Rule Making (ANPRM) for liability MSAs.

In CMS-6047-ANPRM (titled: "Medicare Program; Medicare Secondary Payer and "Future Medicals"), CMS offered seven options for dealing with future medicals in liability cases. NAMSAP conference speaker Douglas Shaw reviewed the CMS options and summarized the 107 comments submitted by interested parties.

Virtually all of the comments, according to Shaw, opposed the ANPRM in whole of in part. The primary objections concerned CMS' concept of "equitable apportionment" and the CMS failure to recognize differences between liability and workers compensation cases.

CMS followed up its ANPRM by sending a Notice of Proposed Rule Making (NPRM) to OMB on August 1, 2013, then withdrew the NPRM without explanation on August 8, 2014. Shaw stated that OMB (which reviews NPRM for cost and benefits, duplications, economic impact, effect on stakeholders) rejected the CMS NPRM and no one knows why except OMB and OMB is prohibited from providing explanations.

Shaw cautioned against groups (such as the AAJ) claiming a regulatory victory. He expects CMS to resubmit another NPRM for liability MSAs in the near future. Multiple NAMSAP speakers pointed out the obvious - since the enactment of MMSEA in 2007, CMS has been collecting data for all claims involving Medicare beneficiaries. This Medicare-related claims data is creating a potential tax-free source of revenue for the U.S. government - billions of Medicare dollars not yet collected to fund Medicare.

As for current liability cases and liability MSAs, Shaw advised that "nothing has changed so we should stay the course and do whatever we thought best before this ANPRN/NPRM."

ICD-10

Adding to claim management and settlement planning complexity in 2015, the United States compliance date for the 10th revision of the International Statistical Classification of Diseases and Related Health Problems (ICD-10) is October 15, 2015.

Although most of the NAMSAP audience appeared ICD-10 conversant, Marci Moorehead provided an informative overview of this World Health Organization (WHO) medical classification coding system which many other countries have already implemented. Moorehead predicted the migration to ICD-10 will have a significant impact on business intelligence tools which means life care plans, MSAs and settlement plans likely will be affected.

NAMSAP's 2015 Annual Meeting will take place September 29-October 2 at the Royal Sonesta Hotel in New Orleans.

NAMSAP 2015 Winter Conference - Topics and Speakers

• 3 Parts of Compliance and the SMART Act in 2015
  • Moderator - Katie Fox
  • Monika Boswein
  • Brian Chance
  • Roy Franco
• ANPRM Update - Doug Shaw
• ICD-10 - Marci Moorehead
• Advocacy - Take the Hill and Other Issues
  • Katie Fox
  • Roy Franco
  • Doug Shaw
• Private Cause of Action and False Claims
  • Rasa Fumagalli
  • William Delaney
  • Mark Poplizio
• Working Lunch with Case Studies - Moderator - Thomas Spratt
• Protecting the Client
  • Daniel Hayes - Moderator
  • Ray Alverez
  • Anita Hunt
  • Tracey Jones

Structured Settlements 2014 - Settlement Planning

During the late 1970s, and throughout the 1980s, when defendants retained exclusive control of structured settlements, many brokers and their liability insurance company clients referred to unsuccessful sales as "cash outs". Their professional interests and curiosity were narrowly defined and focused upon their own product to the exclusion of other settlement related products and services.

With the advent of plaintiff structured settlement brokers, continuing legislative and regulatory developments, plus an expanding array of settlement planning professionals, products and product providers, structured settlements are now viewed by most stakeholders as a subset of the larger and more complex personal injury settlement planning market.

For future success, a new generation of structured settlement leaders must look beyond structured settlements and learn to re-position their product as a fundamental and catalytic settlement planning component. This strategic adjustment requires a more comprehensive understanding of, and interaction with, other professional associations whose members also provide settlement planning products and services.

During 2014, S2KM attended 13 national educational conferences sponsored by such professional associations. What follows are 2014 summaries, from a settlement planning perspective, of the educational programs offered by these professional associations plus links to related S2KM reporting. Prior S2KM blog posts provide 2014 summaries of the primary and secondary structured settlement markets. A subsequent S2KM blog post will summarize continuing 2014 developments related to ELNY and Reliance.

American Association for Justice (AAJ)

The role of personal injury attorneys historically has encompassed settlement planning and negotiation as well as litigation. As settlement planning has become increasingly complex, however, personal injury attorneys now require the services of other settlement planning professionals including: tax attorneys, special needs attorneys, settlement trustees, financial planners, structured settlement specialists, life care planners, case managers, economists, Medicare set-aside (MSA) specialists and damage allocators.

Regardless of case complexity, plaintiff attorneys continue to perform the following essential settlement planning roles:

• Recognizing settlement planning issues which impact their clients;
• Recommending appropriate settlement planning professional resources to their clients; and
• Retaining ultimate responsibility for effectuating settlements.

As one result, plaintiff attorneys represent the primary marketing target for for companies and professionals offering settlement planning services. Seven primary market brokers, one structured settlement annuity provider and one factoring company were among the 141 sponsors and exhibitors at the AAJ 2014 Annual Conference which also included companies offering lien resolution, MSA compliance, life care planning, legal finance and economic consulting services.

Notable features of the 2014 AAJ conferences:

• AAJ's educational programs focused on litigation issues with no structured settlement, no Affordable Care Act (ACA) and almost no settlement planning presentations.
• Exhibiting structured settlement brokers shared one distinguishing characteristic - their product and service offerings extended far beyond traditional structured settlements.

Related Resources:

• AAJ 2014 Winter Meeting
• AAJ 2014 Annual Meeting

Society of Settlement Planners (SSP)

SSP is a professional association most of whose members are plaintiff structured settlement brokers. SSP's 2014 Annual Conference provided three important contributions to settlement planning.

First, SSP President Neil Johnson's SSP keynote speech, which he repeated at NSSTA's Fall Conference, highlighted continuing polarization among structured settlement professionals and proposed the following solutions: 1) recognizing and accepting product diversity; 2) focusing on client and customer service; 3) identifying and pursuing permanent shared interests without necessarily agreeing on all issues; 4) engaging all perspectives to discuss industry problems and issues; 5) improving relationships among stakeholder groups; 6) promoting and practicing settlement planning not settlement selling.

Second, consistent with Johnson's proposed unification solutions, SSP's Secondary Market Panel featured two leading structured settlement transfer experts whose clients typically oppose each other in secondary market cases: NASP Executive Director Earl Nesbitt and Stephen Harris, former co-Chairman of NSSTA's legal committee.

Third, SSP speaker Michele Fuller identified her list of 2014 settlement planning "game changers" as a baseline for industry discussion:

1. Affordable Care Act.
2. Lien resolution statutory and regulatory developments.
3. Federal recognition of same-sex marriages.
4. Wrongful death caps determined unconstitutional.
5. State and federal tax reform.
6. Potential reductions in social security benefits.
7. MSAs in liability cases.
8. Settlement planning goes cyber.
9. Increasing need for Qualified Settlement Funds.
10. Increasing number of persons with disabilities.

Related Resources - SSP 2014 Annual Conference

• Part 1 - Secondary market panel.
• Part 2 - Conference summary.

National Structured Settlement Trade Association (NSSTA)

By inviting NASP President Patricia LaBorde and SSP President Neil Johnson to speak at its members-only 2014 Fall Educational Conference, NSSTA took a symbolic step toward restoring its original vision as articulated by David Ringler, NSSTA's first president: "a place where everyone and anyone can sit down with each other and discuss the issues and viewpoints regardless of beliefs is the most important reason for NSSTA."

For the past several years, NSSTA's leadership has superimposed a political litmus test for membership, as well as for topics and speakers at its educational conferences. NSSTA's near-sighted strategy has limited the potential growth of structured settlements within the larger and more complex settlement planning market and created multiple challenges for the next generation of structured settlement leaders.

Structured settlements, however, represent a core settlement planning product with emerging product improvements and nontraditional products demonstrating the potential for settlement planning market expansion. In addition, NSSTA's Fall conference underscored, and re-enforced, NSSTA's and NSSTA members' strategic settlement planning relationship knowledge about and with: 1) plaintiff attorneys; 2) insurance associations; 3) insurance claims adjustors; 4) national consumer associations; 5) U.S. Congressional members; and 6) MSA administrators - as well as with SSP and NASP.

Related Resources:

• NSSTA 2014 Fall Educational Conference
• Potential "Game Changing" Structured Settlement PLR
• Structured Settlements 2014 - Primary Market

National Association of Settlement Purchasers (NASP)

Assuming settlement planning includes adjustments during an injury victim's lifetime, structured settlement transfer (factoring) companies should be included among settlement planning participants. Like NSSTA, its primary market counterpart, NASP and its members face serious challenges which NASP president Patricia LaBorde acknowledged during NASP's 2014 Annual Conference.

"There are some forces working against us right now" Laborde stated, "and we need to remain diligent so our customers (structured settlement recipients who sell payment rights to NASP member companies) continue to have access to liquidity." These "negative" forces include predicted secondary market "chaos" resulting from the Washington Square v. RSL case as well as market restrictions resulting from anti-assignment lawsuits.

Shared educational dialogue among representatives of NASP, NSSTA and SSP during 2014 appear to support the possibility of increasing primary and secondary market integration as predicted by Peter Arnold during his NASP conference presentation.

Related Resources:

• NASP 2014 Annual Conference
• Structured Settlements 2014 - Secondary Market

Academy of Special Needs Planners (ASNP)

ASNP is one of three national associations of attorneys whose members practice special needs (SN) planning. SN planning encompasses individuals with congenital and developmental defects, as well as personal injury victims, and therefore represents a parallel market which overlaps with personal injury settlement planning.

For the past eight years, ASNP has sponsored some of the best educational programs addressing settlement planning topics including such fundamental issues as: "know your client", "needs analysis", "best practices", "industry standards" and "product suitability", as well as "professional responsibility, qualifications and liability".

Among other topics, the ASNP 2014 Conference expanded previous ASNP educational programs about the Patient Protection and Affordable Care Act (ACA aka "Obamacare") including a multi-professional "ACA Panel" consisting of: David Lillesand (attorney); Ann Koerner (life care planner); and Scott MacDonald (investment adviser).

Other settlement planning topics addressed during ASNP's 2014 Annual Conference:

• Blaine Brockman and Patricia Kefalas Dudek spoke about "Housing, Food Assistance, Employment Benefits" - critical topics for many people with disabilities which are rarely addressed at structured settlement and settlement planning educational conferences.
• Cynthia Barrett discussed "Post-Windsor Issues for LGBT Couples & Children" - another settlement planning subject other settlement planning conferences failed to encompass.

Expanding its settlement planning educational programs, ASNP is currently sponsoring a 12-part settlement planning webinar series which demonstrates both the growing importance of settlement planning for SN attorneys as well as the broad scope of settlement planning topics.

Related Resources:

• ASNP 2014 Annual Conference
• ASNP Settlement Planning Webinar Series
• ACA and Future Medical Expenses

National Alliance of Medicare Set-Aside Professionals (NAMSAP)

NAMSAP is the only national professional association whose singular focus is Medicare Set-Aside (MSA) arrangements. NAMSAP's growth has paralleled the expansion of workers compensation MSAs (WCMSAs) to satisfy the requirements of the Medicare Secondary Payer (MSP) Act. Enacted in 1980, the MSP Act requires certain insurers, including liability, automobile, no-fault and workers compensation insurers, to make payment first for services to Medicare beneficiaries regarding claimed injuries, with Medicare responsible only as a “secondary payer.”

The Center for Medicare & Medicaid Services (CMS) published a WCMSA Reference Guide (WCRG) on March 29, 2013 plus a WCRG Version 2.0 on November 7, 2013. Both address structured settlement issues and provide guidelines for their utilization. WCMSAs represent one of the few submarkets where structured settlements sales have increased since 2008 - in large part because the method CMS requires for calculating WCMSA present values provides an inherent cost advantage for annuities compared with lump sum alternatives.

CMS withdrew its Notice of Proposed Rulemaking (NPRM) related to liability MSAs in October 2014 because it failed to gain approval from the Office of Management and Budget (OMB). Therefore, settlement planners must continue to analyze each liability case individually to determine whether and how to protect Medicare's interests.

During NAMSAP's 2014 Regional Conference, Roy Franco predicted the following settlement planning changes likely to result from the Bipartisan Budget Act of 2013, implementation of the ACA and the still anticipated CMS rules for liability MSAs: "workers' compensation, liability and no-fault insurers will all become primary payers vis a vis Medicare, Medicaid and ACA health providers" as part of integrated settlement planning models similar to WCMSAs." Franco added, however, that different state models are likely to develop as a result of both state-specific collateral source rules and the new Medicaid reimbursement rules promulgated by the Bipartisan Budget Act of 2013.

Related Resources

• NAMSAP 2014 Regional Conference
  • Part 1
  • Part 2
• NAMSAP 2014 Annual Meeting
• Bipartisan Budget Act of 2013

Evolve Qualified Settlement Fund (QSF) Symposium

Organized "to provide a forum for open dialogue that helps shape industry developments", the 2014 Evolve QSF Symposium avoided the single claimant controversy and focused instead on other important QSF and settlement planning issues including:

• How QSFs reconfigure the traditional settlement planning process.
• QSF-related compensation issues for administrators and structured settlement brokers.
• The increasingly important settlement planning roles for life care planners and case managers.
• QSF-related tax issues such as state taxation, foreign structured settlement assignment companies and structured attorney fees.

Related Resources

• Evolve 2014 QSF Symposium
• Single Claimant QSFs Revisited
• "How the ACA Affects Nurse Life Care Planners"
• Wendie Howland Interview

National Academy of Elder Law Attorneys (NAELA)

NAELA was the first and remains the largest U.S. professional association focused on the needs of elder and special needs law attorneys. Responding to its own strategic challenges, NAELA organized its 2014 Annual Conference to address what it perceives to be its two primary strategic issues: 1) the future needs of persons with disabilities; and 2) the future of elder law.

Compared with ASNP, however, NAELA's educational programs rarely address settlement planning or structured settlements. When NAELA members discuss special needs planning, many tend to think about developmental (as opposed to personal injury) disabilities. Unfortunately, many NAELA members view structured settlements negatively despite familiarity with the concept and a general affinity for annuities.

Related Resources

• NAELA 2014 Annual Conference
• Person-Centered Planning
• Cornell Disability Studies, Research, Statistics

Structured Settlements 2014 - Primary Market

The United States structured settlement primary market has continued to slowly recover from its 2012 nadir during 2014 with first nine months annuity sales of approximately $3.9 billion resulting from 19,778 cases (as reported by Melissa Evola) a premium increase of 3% compared to $3.73 billion for the same period in 2013.

Total projected 2014 annual premium of $5.28 billion, however, is expected to fall substantially short of the historic 12 month industry apogee ($6.2 billion in 2008) after consistently averaging close to $6 billion annually from 2001-2007. For estimated annual structured settlement annuity sales since 1976, see the structured settlement wiki.

Adding these 2014 third quarter results to historic U.S. structured settlement totals, S2KM estimates the following primary market metrics from 1976 thru September 30, 2014:

• Total annuity premium: $143 billion.
• Total structured settlement cases: 822,000
• Average annuity premium: $174,000.

Nine month 2014 sales results for individual structured settlement annuity providers (per Evola's report) which are members of the National Structured Settlement Trade Association (NSSTA) plus the rounded increase (+) or decrease (-) from comparable 2013 results:

• Berkshire Hathaway - $1.113 billion (+ $79 million)
• MetLife - $678 million (+ $114 million)
• Pacific Life - $553 million (- $47 million)
• Prudential Life - $463 million (+ $90 million)
• Liberty Life - $430 million (+ $21 million)
• Amgen/USL - $378 million (- $57 million)
• New York Life - $206 million (+ $14 million)
• Mutual of Omaha - $40 million (- $10 million)

Notes

• Allstate and John Hancock, which have departed the structured settlement market, sold a combined $79 million of structured settlement annuities during the first nine months of 2013.
• To better understand their clients' "perceptions, utilization and understanding of the value of structured settlement consultants" (and presumably to improve industry sales), NSSTA has retained CLM Advisors to conduct separate marketing surveys of property & casualty 1) senior claims executives and 2) claims adjustors as well as 3) plaintiff attorneys. The results of Phases 1 and 2 were presented at NSSTA 2014 educational conferences.

Low Interest Rates

Many structured settlement industry participants attribute decreased sales to low interest rates. Market yields on U.S. Treasury securities at 30 year constant maturity peaked at 13.45 percent in 1981. Here are several historic average annual rates for 30 year Treasury securities (source: U.S. Department of the Treasury):

• 2014 (as of December 5) - 2.97%
• 2013 - 3.96%
• 2012 - 2.95%
• 2011 - 3.91%
• 2010 - 4.25%
• 2009 - 4.08%
• 2008 - 4.28%
• 2007 - 4.84%
• 2000 - 5.94%
• 1990 - 8.61%
• 1980 - 11.27%

Submarkets - Two noteworthy submarkets are incorporated within the structured settlement annuity production numbers set forth above:

• Non-Qualified Assignments
  • Non-qualified assignments represent transfers of periodic payment obligations that do not meet the requirements of IRC section 130.
  • Unlike qualified assignees, U.S.-based, non-qualified assignees are subject to income tax on the amount they receive from whatever entity assigns (or more accurately "delegates") periodic payment obligations for claimants who do not qualify for tax exclusions under IRC section 104(a)(1) or (2) - such as employment discrimination cases or deferred attorney fees.
  • Despite the promise of a large potential "non-qualified assignment" market, reported sales on non-qualified structured settlement annuities by NSSTA members have declined since 2012.
  • Reported nine month 2014 non-qualified structured settlement sales totaled $113.2 million compared with $124.3 million in 2013.
• Medicare Set-Asides
• A Medicare set-aside (MSA) is an administrative and funding mechanism utilized in certain categories of settlements to protect Medicare's interests as "secondary payer" under the Medicare Secondary Payer (MSP) statute.
• Although Federal law does not define MSAs, or mandate specific types of MSA funding mechanisms, CMS (the responsible federal agency) has established certain basic requirements for workers compensation MSAs (WCMSAs).
• No similar rules exist for liability MSAs. In October 2014, CMS withdrew a Notice of Proposed Rulemaking (NPRM) which was expected to address liability MSAs.
• Under current CMS rules, structured settlement annuities have an inherent cost advantage over lump sum alternatives for funding WCMSAs resulting from the method CMS prescribes for calculating present values.
• Based upon industry sources, S2KM has previously estimated that eight (8%) percent of 2013 structured settlement premium and 24 percent of 2013 structured settlement annuities were attributable to WCMSAs. Under current CMS rules, these numbers could increase in 2014.

Product Developments - Significant structured settlement product developments occurred during 2014 including:

• Equity-indexed Annuity Rider - Pacific Life has obtained a Private Letter Ruling (PLR-143928-13) from the IRS approving favorable tax treatment for a structured settlement annuity with annual payment adjustments based on the performance of the Standard & Poors 500 Index. Although life insurance companies first offered equity-indexed annuities during the mid-1990's to compete with indexed mutual funds, Pacific Life's ILAAPR represents the first U.S. equity-indexed structured settlement option. To achieve market success, structured settlement consultants must convince settlement recipients that potentially higher long-term ILAAPR payouts (based upon S&P 500 performance) will offset lower starting payments compared with traditional structured settlement annuities.
• Hardship Conversion Feature - PLR-143928-13 also approves favorable tax treatment for a structured settlement annuity with a commutation pursuant to a Notice of Hardship Conversion which the PLR describes as follows: "The Notice of Hardship Conversion provides that the Assignee will consider a request from Claimant to convert future guaranteed structured settlement payments to an immediate lump sum payment, in certain qualifying hardship circumstances, if the request is approved by a court or applicable administrative authority pursuant to a qualified order under § 5891(b)(2). The qualifying hardship circumstances are financial hardship due to medical expenses, expenses related to a terminal illness, home improvement expenses for handicap accessibility, job loss, loss of home, and the same type of expense for the payee’s dependents. Assignee expressly represents that it reserves the right to decline any hardship conversion request and that it will consider each hardship conversion request on a case-by-case basis. In addition, Assignee represents that it will not allow any hardship conversion in the first year after a qualified assignment."
• Periodic Payment Reinsurance - Although first offered in 1982, Berkshire Hathaway re-introduced its periodic payment reinsurance product during 2014.  Issued by National Indemnity Company, a Berkshire property and casualty company, this product is available for both tax-free periodic payments [under IRC 104(a)(1) and/or (2)] and non-IRC 130 tax-deferred periodic payments. In many respects analogous to traditional structured settlements, Berkshire asserts multiple advantages for its reinsurance product. These include greater financial strength than other structured settlement product providers plus higher interest rates because, unlike life insurers, National Indemnity's investments are not concentrated in bonds. Unlike traditional structured settlements, however, periodic payment reinsurance does not qualify for guarantee fund coverage and cannot be used by self-insureds. For more detailed analysis of periodic payment reinsurance as well as other structured settlement financing alternatives, see Chapter 3 of "Structured Settlements and Periodic Payment Judgments" (S2P2J).

Primary Market Challenges - Reporting on NSSTA's 2014 Fall Educational Conference, S2KM summarized the following challenges currently facing the structured settlement primary market:

• Generational transition
• Stagnant growth
• Polarized and complex overlapping market(s)
• Alternative business models
• Increasing competition
• Changing success factors

In subsequent blog posts, S2KM will address 2014 structured settlement developments related to the secondary market, personal injury settlement planning and the ELNY liquidation. For prior S2KM annual reporting, see the structured settlement wiki.

NSSTA 2014 Fall Educational Conference

Although David Ringler was unable to attend the National Structured Settlement Trade Association (NSSTA) 2014 Fall Educational Conference October 29-30 in La Jolla, California, he had an apparent impact. Ringler, NSSTA's first president, previously re-stated his original vision for NSSTA during NSSTA's 25th anniversary celebration in 2011:

"Although we do need to constantly be on the watch for legislative change, I still believe having a place where everyone and anyone can sit down with each other and discuss the issues and viewpoints regardless of beliefs is the most important reason for NSSTA. I have called it a common “talk table”, although I agree that is not exactly a very elegant term. If we can continue this tradition, there is no problem we cannot overcome."

Many industry participants, including some NSSTA members, have questioned whether NSSTA has lost sight of this original purpose and tradition. For the past several years, NSSTA's leadership has superimposed a political litmus test for membership, as well as for topics and speakers at its educational conferences. As one result, structured settlement industry participants with alternative issues, viewpoints, beliefs and educational interests have founded two other national structured settlement associations: the National Association of Settlement Purchasers (NASP) in 1996 and the Society of Settlement Planners (SSP) in 2000.

NASP and SSP Participation

Perhaps responding to Ringler's clarion call, NSSTA opened its members-only educational program in La Jolla by inviting NASP President Patricia LaBorde and SSP President Neil Johnson to speak.

LaBorde was featured on a Secondary Market Panel, moderated by John McCulloch, which also included Stephen Harris and Patrick Hindert as panelists. McCulloch's questions targeted primary market concerns such as the prevalence of secondary market transfers, consequences of transfer company advertising and secondary market discount rates. The resulting discussion captured the audience's undivided attention and hopefully will result in expanded educational dialogue between NSSTA and NASP to include shared political and business interests.

Johnson and current NSSTA President Kevin Silo jointly addressed "Industry Challenges", a panel discussion moderated by NSSTA President-elect Michael Goodman. Repeating portions of his SSP 2014 keynote speech, Johnson proposed the following solutions for achieving industry unity: 1) recognizing and accepting product diversity; 2) focusing on client and customer service; 3) identifying and pursuing permanent shared interests without necessarily agreeing on all issues; 4) engaging all perspectives to discuss industry problems and issues; 5) improving relationships among stakeholder groups; 6) promoting and practicing settlement planning not settlement selling.

Generational Change and Challenges

NSSTA and the primary structured settlement market face multiple challenges (see below) - perhaps none greater than succession. What new generation of distributors, or distribution channel(s), will emerge (and when) to replace and build upon the accomplishments of the pioneering generation (now in their 60s and 70s) who originated the structured settlement market in the late 1970s?

In addition to generating more than $140 billion of annuity premium, the legacy of NSSTA's retiring generation includes enactment of the existing structured settlement legislative framework: current IRC sections 104(a)(1) and (2) and 130 plus multiple state periodic payment of judgment statutes and (with NASP) enactment of IRC 5891 and the state protection statutes. More recently, however, NSSTA's aging leadership has focused on defense - with "protect and preserve" its principle mantra.

NSSTA attempted to addressed this generational succession issue at its Fall conference by juxtaposing panels featuring past NSSTA Presidents and "Next Generation" brokers. The impression that emerged: NSSTA and the primary market have reached an historic crossroads - with multiple stakeholders, issues and options, but no clear future direction.

Whatever next generation of NSSTA leaders emerges will face several challenges:

• Stagnant growth - Since achieving $6 billion of annual annuity sales in 2001, structured settlement premium growth has stagnated with 2013 sales totaling $5.1 billion.
• Polarized market(s) - NSSTA's leaders have been unable, and/or unwilling, to unify the structured settlement market(s) around such shared interests as: primary market growth; preservation of existing legislation; and consumer protection - which prioritizes maintaining promised periodic payments.
• Alternative business models - Can alternative structured settlement models (traditional defense vs. emerging plaintiff) continue to co-exist and collaborate?
• Complexity - Structured settlements represent a strategic product within the larger and more complex personal injury settlement planning (settlement planning) market.
• Product features - Will Pacific Life's recent private letter ruling encourage structured settlement annuity providers to expand their product offerings to include "equity-indexed" annuities and "hardship conversions"?
• Competition. Within the settlement planning market, the growth and leadership of other product and service providers has increasingly exceeded the growth and leadership of structured settlement participants.
• Success factors. To expand sales within the evolving settlement planning market, NSSTA's leaders must re-think and re-engineer historical success factors - backgrounds and skill sets; educational programs; business models; product enhancements; sales and marketing strategies.

KNOWLEDGE MANAGEMENT

The settlement planning market is knowledge-intense and increasingly Internet-based. To continue, and increase, their historical success within the evolving settlement planning market, NSSTA and its members must improve their knowledge management capabilities. One preliminary step is to identify and evaluate existing strategic knowledge. NSSTA and its members possess three primary types of strategic knowledge:

• Product knowledge - The "Tax Posse", the ACA summary, and even the Non-traditional Products presentation at NSSTA's Fall conference represent good examples of NSSTA's product knowledge. Perhaps more important, and more valuable, than explicit product knowledge, NSSTA members possess tacit (intuitive, experiential) knowledge of how structured settlements work. In the context of the secondary market, however, NSSTA member knowledge of its own product is arguably much weaker, and, therefore, incomplete and less valuable.
• Relationship knowledge - Much of NSSTA's Fall conference related to, and re-enforced, NSSTA's and NSSTA members' settlement planning relationship knowledge about and with: 1) plaintiff attorneys; 2) insurance associations; 3) insurance claims adjustors; 4) national consumer associations; 5) U.S. Congressional members; 6) MSA administrators; 7) SSP; and 8) NASP. In settlement planning, as in life more generally, it is not what you know but who you know that counts the most.
• Market knowledge - Compared with other settlement planning market segments, NSSTA (and NASP) appear to have developed and maintained more accurate market metrics including quarterly and annual premium and cases in total and for each member product provider. To further expand structured settlements into the settlement planning market, NSSTA and its members might begin to track additional metrics. For examples: what percentage of structured settlements are utilized to fund MSAs, SNTs and settlement trusts more generally. Which categories of structured settlement recipients are most likely to sell payment rights and why?

MARKETING INITIATIVES

NSSTA conference speakers introduced multiple new marketing initiatives including:

• "NSSTA University" - NSSTA's Debbie Sink announced a new "NSSTA University" service whereby NSSTA will partner with any member to secure CE credits for member-sponsored educational seminars or insurance claims departments or law firms.
• CLM Survey Part II - In partnership with CLM Advisors, NSSTA's Marketing Committee summarized CLM Survey Part II (claims adjustors) of an eventual three part survey project. Part I surveyed claims executives. Part III will survey plaintiff attorneys. These surveys provide NSSTA members with valuable marketing tools for discussions with the audiences surveyed.

TOPICS AND SPEAKERS

• Introduction and Welcome - Eric Vaughn.
• Industry Challenges - Michael Goodman (Moderator), Kevin Silo, Neil Johnson.
• Next Gen Brokers - Louis Masry (Moderator), Kristen Chess, Ryan Garrison, Tony Robinson.
• Financial Issues for People with Disabilities - Sally Greenberg and Mark Perriello.
• AAJ Treasurer Elect - Elise Sanguinetti.
• MSA Professional Administration - Tom Adams (Moderator), Marques Torbert, Joe Anderson.
• Affordable Care Act - Jordan Bossler.
• Past NSSTA Presidents - Moderators (Kevin Silo; Eric Vaughn); Jeff Bowers, Len Blonder, Joe Costello, Mal Deener, Dan Durbin, Randy Dyer, Dan Finn, Patrick Hindert, John Machir, Henry Strong.
• Factoring Panel - John McCulloch (Moderator), Stephen Harris, Patrick Hindert, Patricia LaBorde.
• Non-Traditional Products - Erin Muller (Moderator), John Arendt, Ryan Jandreau, Jeff Reinhold, Chris Shumate, Ravi Vaswani.
• American Insurance Association - Peter Foley.
• CLM Survey Part II - Taylor Smith, Susan Clark, Jeff Livingston.
• Tax Posse - John McCulloch, Timothy O'Driscoll, Tom Ronce.
• NSSTA CE News - Erin Muller and Debbie Sink.

Congratulations to NSSTA and conference chairperson Erin Muller for re-establishing NSSTA's tradition of educational programs featuring speakers with multiple viewpoints on industry issues "regardless of beliefs". David Ringler and other structured settlement pioneers should feel gratified - and hopeful for NSSTA's future success.

For S2KM's reports about prior NSSTA educational conferences, see the structured settlement wiki.

S2P2J Release 56

Publisher Law Journal Press will be distributing hard copy supplements for Release 56 of "Structured Settlements and Periodic Payment Judgments" (S2P2J) later this month with online S2P2J subscribers receiving their update automatically and simultaneously. Online S2P2J includes a search feature and download capability as well as link features to access individual book sections, appendices, footnotes, cases and statutes.

First published in 1986 and updated semi-annually, S2P2J is co-authored by Daniel W. Hindert, Joseph J. Dehner and Patrick J. Hindert (S2KM's Managing Director). Both the National Structured Settlement Trade Association (NSSTA) and the Society of Settlement Planners (SSP) have utilized S2P2J as an educational resource for their certification programs.

Highlights from Recent S2P2J Updates

Release 56 

• Practice tips for minimizing the risk of an IRS settlement challenge.
• Updated summary of lessons learned from the Executive Life Insurance of New York (ELNY) insolvency.
• Periodic payment reinsurance as an alternative means of funding structured settlements.

Release 55 

• Risks of using off-shore companies to fund qualified assignments.
• Meeting professional responsibilities for product disclosures.
• Subrogation rights impacting structured settlements.
• Choice of law provisions for attorney compensation.
• Medicaid liens and the 2013 Bipartisan Budget Act.
• How the Brenston case impacts transfer applications.
• Document drafting for anti-assignment restrictions.
• Vermont's structured settlement protection act amendments.

Release 54 

• New considerations for negotiating structured settlements vs. cashing out.
• Defendant disclosure issues.
• Business practice update for consultants.
• Insurance company insolvencies - ELNY and Reliance.
• Medicare set-aside developments.
• Re-cycled structured settlement payment rights.
• Securitization of structured settlement payment rights.
• Australia structured settlement update.

Wendie Howland Interview - 3

In two prior S2KM blog posts (Part 1 and Part 2), Wendie A. Howland, MN, RN-BC, CRRN, CCM, CNLCP, LNCC, a nationally recognized life care planning expert, has helped to explain why life care planners increasingly impact multiple overlapping markets including structured settlements, personal injury settlement planning, special needs planning, and Medicare set-asides (MSAs).

In this blog post, which concludes the interview series, Wendie responds to criticism of life care planners promulgated by some attorneys.

The following criticisms appear in this online copy (beginning page 32) of a July 10, 2014 presentation titled "The Affordable Care Act: Taking a New Approach to Damages" by attorneys Caryn L. Lilling and Thomas R. Shimmel at the American Conference Institute's 13th Annual "Advanced Forum on Obstetric Malpractice Claims."

Ms. HOWLAND: Before I respond to specific criticism, let me say that some of the criticism below may result from lack of understanding or familiarity with nurse life care planning as opposed to life care planners whose underlying credential is vocational rehabilitation or related fields, and who may use proprietary software to produce canned life care plans. My responses apply to certified nurse life care planners and, more specifically, to me.

CRITICISM: Life care planning is a profession sponsored by the plaintiff's bar.

Ms. HOWLAND: I do approximately half of my expert work as a life care planner on the defense side. If a defense attorney made this criticism, you can send him or her my contact information and I would be happy to help them also.

CRITICISM: There is no government licensure or government endorsed certification for life care planners in most states.

Ms. HOWLAND: This criticism indicates unfamiliarity with life care planning, professional licensure, and certification in general. It is true that there are no states that license any form of life care planners or that endorse any certification program for life care planning. However, all states do license, regulate, and endorse registered nurse practice, the basis for certification and practice in nurse life care planning and which mandates RNs’ nursing assessment, planning, and treatment of human response to illness or injury. Non-RN life care planners who do personal assessments and form opinions that exceed the scope of practice of their basic licensure often rely on other professionals’ imprimatur for their plans, and attorneys often take such endorsement as a guarantee of comprehensiveness and accuracy. This practice does not represent a wise or informed decision. By comparison, RN legal scope of practice fully encompasses what we do as evidenced by the Certified Nurse Life Care Planning Certification Board requirements for the CNLCP examination.

CRITICISM: Life care planners' "expert testimony" is raw hearsay and largely fictions.

Ms. HOWLAND: The rules of evidence are clear that we and other experts are entitled to rely upon documents, such as medical records and opinions from other disciplines, about the status and care of individuals when forming our opinions. This is not hearsay. As to any implication that I would lie under oath at deposition or trial, I have no wish to dignify it with further comment.

CRITICISM: Life care plans are not based on real economic or medical data.

Ms. HOWLAND: A good and proper life care plan is based on research about items and services that will be reasonably necessary. This includes using medical records. It also includes literature searches for the most current applicable research-based guidelines, with appropriate citations, and current pricing in today’s dollars obtained from named sources, e.g., vendors or suppliers.

CRITICISM: Life care planners purposely ignore past actual medical expenses and costs.

Ms. HOWLAND: It is not that we ignore past costs. A life care plan is, by definition, for the future. I cannot predict - for example, that any past agreement on discounts or write-offs will continue. My role is to look at future needs and give today’s costs and let a qualified medical economist calculate future costs. Further, when medical bills are on a self-pay basis, as they will be post settlement, negotiations with providers are usually not possible. Self-pay rates are substantially higher than plan reimbursement rates.

CRITICISM: Life care planners do not know the average life time costs for normal individuals.

Ms. HOWLAND: Many good sources exist for current costs of everything under the sun. Examples: you can look up the costs of raising a child from birth through college, home ownership vs. rentals, home maintenance, transportation, clothing, food, utilities, preventative medical and dental care, long-term care, and just about anything else you can think of. This criticism could imply that there should be offsets for these items against any increased costs related to an injury. Some life care planners, for example, will subtract the average cost of an unmodified van from the cost of a van modified. The litigating attorneys should sort out these types of issues. The injury victim might have been a Zipcar user or a bicycling commuter who now needs a modified van is because he is a quadriplegic.

CRITICISM: Life care planning testimony (LCPT) is unfairly prejudicial and likely to mislead the jury because:

• CRITICISM: LCPT has no basis in fact.
• Ms. HOWLAND: Again, as to any implication that I would purposely attempt to mislead or lie under oath at deposition or trial, I have no wish to dignify it with further comment.
• CRITICISM: LCPT is not substantiated by national statistics.
• Ms. HOWLAND: National statistics related to what? As Tip O’Neil famously said, all politics is local. When I estimate future costs, I look at local suppliers and facilities when at all possible. If I need to rely on a national database for particular information, e.g., the U.S. Renal Data Systems for information on renal failure, dialysis, and transplantation, or the National Vital Statistics Report for life expectancy (required, by the way for MSAs), or the National Spinal Cord Injury Statistical Center for outcomes on different levels of spinal cord injury, I will.
• CRITICISM: LCPT is not supported by past costs.
• Ms. HOWLAND: Past costs are no guarantee of future costs, or even today’s costs. “Today’s dollars” represent the best and most appropriate benchmark. Let the economists do the prognostications.
• CRITICISM: LCPT is designed to create the largest possible award rather than actual recognized cost.
• Ms. HOWLAND: A responsible life care planner should provide the sources of every cost for every item in the plan, in today’s dollars. Using an old canned database without personal assessment and current cost sourcing is not standard of practice. Many persons holding themselves out as life care planners, including physicians, do their clients a disservice because they do not know enough about assessing future needs. I routinely critique plaintiff plans and sometimes tell my defense clients, “If this is all they’re asking for, write the check with a smile, because it’s very inadequate for this person.”

S2KM: Wendie, thank you for participating in this three part interview which is also featured on the structured settlement wiki.

Wendie Howland Interview - 2

The increasing number, importance and roles of life care planners represents a significant development impacting several overlapping markets including structured settlements, personal injury settlement planning, special needs planning, and Medicare set-asides (MSAs).

This S2KM blog post continues a three part interview with Wendie A. Howland, MN, RN-BC, CRRN, CCM, CNLCP, LNCC, a nationally recognized life care planning expert, in which Wendie addresses life care planning qualifications, case management, industry standards, and criticism of life care planners among other issues. Link for Part 1.

S2KM: The two most important U.S. based life care planning professional associations appear to be the International Association of Life Care Planners (IALCP) and the American Association of Nurse Life Care Planners (AANLCP). You belong to the AANLCP.

• How many nurses belong to AANLCP?
• Who are/were the pioneers responsible for developing nurse life care planning?

Ms. HOWLAND: Currently, there are roughly 350 AANLCP members. Not all have earned CNLCP certification. Some are LNCP-Cs and CLCPs, and/or nurses without formal life care planning credentials. All full AANLCP members are registered nurses bound by the ANA Scope and Standards of Nursing Practice and the nurse practice acts of our respective states. Some CNLCPs and RN CLCPs are not AANLCP members. There are also some associate AANLCP members who are not RNs. AANLCP has some Canadian members who are bound by their own nurse practice act.

These excerpts from the AANLCP Core Curriculum for Nurse Life Care Planning (2013) highlight some of our profession's pioneers:

• Lillian Wald - "In the early 1900s, Lillian Wald promoted the term 'public health nurse,' expanding nursing practice to encompass employment, recreation, health education, and sanitation....By the 1940s, the insurance industry was using case management as a method of cost containment"
• Paul Deutsch - "In the mid-1970s, Paul Deutsch first identified the term 'Life Care Planning,' referring to future needs, to describe a tool to project the costs of medical care in the litigation environment." In "Damages in Tort Actions" (1981), a multi-volume text, Deutsch and co-author Fred Raffa "referenced case management, catastrophic disability case management, and catastrophic disability research as means to project future medical care."
• Kelly Lance - "In 1997, the discipline of nurse life care planning (NLCP) began" when Kelly Lance founded AANLCP. "She developed a NLCP curriculum with the nursing process methodology at its core, including concepts and skills pertaining to LCP application in the medical-legal arena."

S2KM: What advantages and disadvantages do nurse life care planners offer compared with life care planners with alternative professional backgrounds and certifications?

Ms. HOWLAND: Our advantage is our licensure as registered nurses. We explicitly use nursing diagnosis, a recognized scientifically validated taxonomy to justify the items in our plan that are based on our nursing assessments. This means that we do not practice medicine, we stay within our scope of practice, and our recommendations stand independent of approval from any other discipline.

S2KM: As editor of the AANCPL Journal, how do you stay "ahead of the knowledge curve" on life care planning issues and developments?

Ms. HOWLAND: Serving as editor of professional journals and the AANLCP Core Curriculum helps inform my practice of life care planning. Reading submissions and working with peer reviewers and authors are excellent ways to learn and help guide my professional practice. Of course, I also attend national educational forums, speak at some, and write articles.

S2KM: What are the most important current issues and developments facing life care planning?

Ms. HOWLAND: Whether and how the Patient Protection and Affordable Care Act (ACA) affects life care planning is probably our most important current issue. For example, two recent California cases appear to require cost offsets based on past or existing insurance benefits. Historically, only Federal vaccine injury fund cases have required such offsets in life care plans. An upcoming issue of the Journal of Legal Nursing will focus on ACA-related issues.

S2KM: Some commentators have suggested the ACA will eliminate the need for life care plans in personal injury cases. Do you agree or disagree?

Ms. HOWLAND: I disagree. The vast majority of life care plan items and their associated costs are not covered by health insurance, including Medicare or Medicaid. Persons who seriously suggest that the ACA will render the need for life care plans moot are poorly-informed on health insurance, life care planning, or both. They should pull out the big booklet that describes their own health insurance and read it. They will be shocked.

S2KM: How important is the Medicare set-aside (MSA) market for life care planners? How does a life care planner's work product for MSAs differ, if at all, compared to work product for non-MSA applications?

Ms. HOWLAND: MSAs take Medicare’s interest into account in funding settlements. Currently, they are only required for worker’s compensation cases. Most life care plan costs are for items that Medicare does not cover. Therefore, it is comparatively simple for whoever prepares the MSA to abstract the applicable information from the much more comprehensive life care plan. Your readers should also know that although MSA certifications exist, Medicare has no requirement whatsoever for persons preparing MSAs to hold any type of certification.

S2KM: How can structured settlement professionals, settlement planners and special needs attorneys learn more about life care planning?

Ms. HOWLAND: I recommend that they ask us directly. Most life care planners welcome opportunities to visit an office or to attend a conference. Understanding the differences between certified nurse life care planners (CNLCP, LNCP-C) and non-nurse CLCPs is also important. Interested professionals should review the IARP and AANCLP websites for information, attend our conferences, and/or invite us to speak at their conferences.

In Part 3 of S2KM's interview with Wendie Howland, Wendie will respond to criticism some attorneys have directed at life care planners.

Wendie Howland Interview - 1

The most recent S2KM blog post highlights the growing strategic importance of life care planners for structured settlement and personal injury settlement planning professionals.

To gain additional knowledge about life care planners, S2KM interviewed Wendie A. Howland, MN, RN-BC, CRRN, CCM, CNLCP, LNCC, owner of Howland Health Consulting, Inc., which S2KM will publish in three blog posts addressing life care planning qualifications, case management, industry standards, and criticism of life care planners.

In addition to her education and certifications, Wendie's professional background includes work as a critical care nurse; catastrophically-injured workers case manager for multiple insurance carriers; and complex medical records review and analysis for catastrophic workers' compensation and liability cases at the reinsurance level.

Recognized as a national expert for nurse standards of practice and care issues, Wendie's current practice includes life care planning and complex medical records review and analysis for liability, workers compensation, elder/trustee, SSDI and Medicare set-aside (MSA) cases. Among her many professional affiliations, Wendie also serves as Editor for both the Journal of Nurse Life Care Planning and the Journal of Legal Nurse Consulting.

S2KM: Wendie, thank you for participating in this interview. What is your best estimate of the number of life care planners in the United States? How many (or what percentage) of the total have:

• A life care planning certification credential?
• A nursing background?

Ms. HOWLAND: I am not sure it is possible to know exactly how many people hold current life care planning credentials of any kind, but the last numbers I have heard are roughly 800 for Certified Nurse Life Care Planner (CNLCP), 2000 for Certified Life Care Planner (CLCP) (approximately 80% of which are not nurses), and 100 for Lifetime Nurse Care Planners (LNCP-C).

S2KM: One of the impressive characteristics about life care planners appears to be their commitment to certification and continuing education. What is your educational background and what certification credentials have your earned?

Ms. HOWLAND: My primary credential in nursing was a B.S. degree from Boston University (nursing major). I earned my master’s degree from the University of Washington in Seattle, in the thesis program for physiological nursing (cardiovascular/critical care). Since my first clinical work was in critical care as a staff nurse and then as a critical care clinical specialist, I earned certifications in critical care nursing and nursing education.

My second career in nursing was in case management, primarily in worker’s compensation and liability for which I earned certifications in case management (CCM, RN-BC) and rehabilitation nursing (CRRN). Many of us in legal nursing consider life care planning “case management on steroids,” so life care planning was a logical next step as I gained expertise.

Now, as a certified nurse life care planner I hold the CNLCP and LNCP-C credentials, and the LNCC for legal nurse consulting. These credentials require both education and experience, what the military would call “time in grade,” as well as sitting for psychometrically-validated exams. To renew them, I take many hours of continuing education and perform other qualifying activities (such as editing professional journals, teaching, and publishing) and submit proof for approval to the respective certifying bodies every five years.

S2KM: What criteria are most important in selecting a life care planner?

Ms. HOWLAND: There are several, in my opinion. First, of course, is looking at the life care planner’s clinical experience. Does the planner have expertise, experience, and connections in the injury or condition involved in the case? Second, certifications are important as they demonstrate experience, competence, and commitment to continued learning in the field. Certification in life care planning should be a given, but judging by some of the plans I have been asked to review, apparently it is not. Third, looking at the credentials and licensure that underlie the planner’s practice is critical. Do they grant the ability to assess, opine, and prescribe for the injury or conditions involved?

Many people think that only physicians are licensed to assess and prescribe for ill or injured people, but that’s not true. It’s important to know the difference between the legal requirement for physicians to prescribe medications or perform surgery, for example, and an insurance company’s requirement to have a physician’s name on a request for goods and services (such as equipment, physical therapy, visiting nursing, assisted living, and others) solely as a means of financial control. I always collaborate with treating physicians and therapists if possible when I’m formulating a life care plan and include their recommendations.

Registered nurses are required to implement some (not all) parts of a medical plan of care. RNs are also licensed to assess function and response to illness or injury and to develop an independent nursing plan of care. We can and do recommend further assessments by other disciplines, adaptive equipment, hours and kinds of nursing care in any setting, and many other needs found in a good life care plan.

In addition, good research and writing skills are important. Life care plans should never be “canned,” i.e., the same for every case, with no evidence of individualization or current research. Every item should have reference to a current assessment need, availability, replacement/maintenance, and source for cost.

Lastly, since much life care planning work involves litigation and may call for deposition or trial testimony, it is generally a good idea to look for someone with public speaking experience and confidence under questioning.

S2KM: How important is the personal injury market for life care planners? How much of your own work involves personal injury cases?

Ms. HOWLAND: Most (but not all) life care planning practices do work that involves litigation, and that usually involves some kind of injury. Examples include workers' compensation, medical malpractice, and personal liability. MSAs represent a growing field of practice. Almost all of my work involves personal injury cases.

S2KM: When you work on personal injury cases, in what percentage of your cases:

• Are your clients plaintiffs vs. defendants?
• Are you retained as a potential expert witness?
• Are you directly involved in settlement negotiations?

Ms. HOWLAND: My cases are about half plaintiff and half defense. Plaintiff clients are interested in knowing about needs and related costs over life expectancy for a person with an injury or other condition. Defense clients are interested in knowing what potential costs could be and why, so they can set reserves and prepare for negotiations. They also want to know if a plaintiff life care plan is reasonable and fair.

Life care planners who are not employees of a defense or plaintiff entity expect to have their work product introduced as part of litigation. I have never been directly involved in settlement negotiations, nor have most life care planners in my experience. I work with my client to make my work comprehensive enough that it can stand on its own as counsel’s tool for negotiations. Some life care planners also work with trust officers after litigation is settled, to help them understand how the money can be spent most appropriately and identify case managers to implement the plan.

S2KM: How much time does it take to develop a personal injury life care plan and how are you compensated?

Ms. HOWLAND: My life care plans for catastrophic injury cases generally take between forty to sixty hours of work, not including travel and testimony time. Like most of my colleagues, I take a retainer and work against it, having it replenished as needed, and provide a detailed invoice monthly or more often if the client requests it.

S2KM: What is the difference between a life care plan and a medical cost projection?

Ms. HOWLAND: A medical cost projection is generalized for a medical diagnosis, as opposed to a comprehensive nursing assessment. It does not include a personal patient assessment. A medical cost projection may be important early post-injury, for example, to help a client set preliminary reserves. I am usually asked to provide medical cost projections soon after injury or as a preoperative estimate when precision isn’t necessarily critical. Since every case progresses differently, it is not possible to know what complications or special circumstances will arise. So the disclaimer says that further information will be helpful to make a more meaningful estimate.

S2KM: Assuming your work product (life care plan) is utilized to develop a personal injury settlement plan, how frequently are you asked to review the settlement plan: 1) prior to its implementation and 2) subsequent to implementation to adjust for new developments or changed circumstances?

Ms. HOWLAND: I have never been asked to review a settlement plan to see how well it matches my recommendations. It is almost impossible for life care planners to obtain information about outcomes or to discover how much, if any, of their life care plan recommendations were actually implemented, or how effectively. That is one of the major barriers to better research in life care planning. Most responsible life care planners inform their clients that a life care plan should be updated at intervals to account for changes in the individual’s condition and also include provisions for a case manager to implement their plan.

S2KM: How can other settlement planning professionals (including plaintiff attorneys, special needs attorneys, settlement trustees and structured settlement brokers) improve their working relationship with life care planners?

Ms. HOWLAND: They should know what they want, know what they can get from us, and know how to use us to their best advantage. They should communicate clearly, with adequate advance notice, what their expectations are, how much they expect and are willing to pay, and how they will use our work products. Nobody wants surprises.

In Parts 2 and 3 of S2KM's interview with Wendie Howland, Wendie will discuss life care planning associations, industry standards and issues as well as criticism of life care planners.

Life Care Planners

The increasing number, importance and roles of life care planners represents one of the most significant developments S2KM has observed while attending 2014 structured settlement and settlement planning stakeholder educational conferences .

Historically, many structured settlement consultants and personal injury settlement planners have partnered with life care planners and incorporated life care plans into their reports.

In its Standards of Practice , the International Association of Life Care Planners (IALCP), which represents one section of the International Association of Rehabilitation Professionals, offers the following descriptions for:

• Life Care Planning: "a transdisciplinary specialty practice. Each profession brings to the process of Life Care Planning practice standards which must be adhered to by the individual professional, and these standards remain applicable while the practitioner engages in Life Care Planning activities."
• Life Care Plan: "a dynamic document based upon published standards of practice, comprehensive assessment, data analysis and research, which provides an organized, concise plan for current and future needs with associated cost for individuals who have experienced catastrophic injury or have chronic health care needs."

The first published reference to life care planning appeared in "Damages in Tort Actions" (1981), a multi-volume text written by life care planning pioneer Paul M. Deutsch Ph.D. and economist Fred Raffa Ph.D. according to an "Introduction to Life Care Planning" which appears on the Paul M. Deutsch & Associates website. Deutsch's "Introduction" further states that life care planning resulted from the integration of three distinct fields of practice: experimental analysis of behavior, developmental psychology, and case management.

Although life care planning originated within, and still primarily focuses upon, the field of personal injury litigation support, its expanded applications now encompass elder care, chronic illness, and discharge planning.

The strategic relationship among structured settlement consultants, settlement planners and life care planners has been further enhanced by Medicare set-aside arrangements (MSAs) which represents a strategically important sub-market for all three professional communities. Life care planners increasingly participate as, or work for, MSA allocators and administrators in addition to providing MSA life care plans and/or medical cost projections.

Life care planners predominate the membership of the National Alliance of Medicare Set-Aside Professionals (NAMSAP), "the only non-profit association exclusively addressing the issues and challenges of the Medicare Secondary Payer Statute and its impact on workers’ compensation and liability settlements". Multiple life care planners were among the featured speakers at NAMSAP's 2014 Winter Regional and Annual Meetings.

Individual life care planners have also expanded their profession's public profile during 2014 as featured speakers at other structured settlement and settlement planning stakeholder conferences including: AAJ (Susan Riddick-Grisham), ASNP (Ann Koerner), SSP (Christine Melancon), and NAELA (Beth Prather). Multiple life care planners exhibited at the AAJ 2014 Annual Conference.

Community Scope and Diversity

Most life care planners have a nursing background and many are members of the American Association of Nurse Life Care Planners (AANLCP). In addition to providing Standards of Practice and a Code of Professional Ethics, ASNLCP offers its members a certification program (CNLCP) and publishes a life care planning Journal. AANLCP's 2014 Educational Conference will take place October 24-27 in Atlanta.

Correction (8/18/2014) - A knowledgeable source has informed S2KM that most life care planners (a plurality) are not registered nurses, but rather vocational counselors, and/or educational consultants, psychologists, and social workers.

IALCP, a separate professional association, promotes itself as "an umbrella organization that supports all life care planners" working with other associations such as ASNLCP and the Foundation for Life Care Planning Research (FLCPR). In addition to its Standards of Practice, IALCP publishes the Journal of Life Care Planning , and sponsors the 2014 International Symposium on Life Care Planning scheduled for September 20-21 in Minneapolis.

Additional resources and diversity within the life care planning community:

• The International Commission on Health Care Certification offers professional credentialing to certify life care planners (CLCP) and Medicare set-aside consultants (MSCC)
• The Care Planner Network provides "an online community in which life care planning and case management professionals can share information about practice management, professional development and challenging case issues."
• "Life Care Planning and Case Management" - a textbook edited by Roger Weed and Deborah Berens is considered "The Bible" of life care planning according to industry representatives.
• Separate organizations featuring physicians and attorneys market life care planning products and services.

Impact of the Affordable Care Act

Although commentators generally agree the Patients Protection and Affordable Care Act (ACA) will impact life care planners and life care plans utilized in personal injury cases, their analysis and conclusions differ. Compare, for example:

• A paper titled "Potential Effects of the Affordable Care Act on the Award of Life Care Expenses", in which economists Joshua Congdon-Hohman and Victor A. Matheson predict life care planners will play an increasingly important role in personal injury damage analysis.
  • Prior to the ACA, life care planners were tasked with identifying medical and living expenses not otherwise required "but for" the accident.
  • Under the ACA, the authors maintain life care planners must also identify which health care and living expenses will, and will not, be covered by the ACA's minimum insurance requirements. And, despite certain minimum federal standards, these requirements may differ by state.
• A paper titled "How Obamacare May Limit Projected Expenses in Personal Injury Life Care Plans" in which attorneys Mark Yagerman and Max Bookman highlight the question of whether ACA implementation should override the collateral source rule and cause the courts or legislatures to allow direct presentation of the plaintiff’s health insurance coverage to the jury.
  • If yes, the authors believe "such evidence should significantly curtail the persuasiveness that life care plans’ projections represent actual future medical expenses that are supposedly to be paid completely out-of-pocket by the plaintiff."
  • The authors acknowledge, however, that certain future expenses in life care plans (“permanent confinement issues” such as long term care, nursing care, and homecare) are rarely covered by health insurance and will still be worked out pursuant to each state's collateral source rule.
  • Other expenses (“frequency issues” such as continuous physical therapy and occupational therapy) are capped under most health insurance plans so recommended visits beyond the frequency cap could likewise be unaffected by the ACA.
• A power point titled "The Affordable Care Act: Taking a New Approach to Damages" in which presenters Caryn L. Lilling and Thomas R. Shimmel offer (beginning page 32) a critical "defense-oriented" view of life care planners and recommend ACA-enhanced strategies for attacking life care planners' professional credibility, testimony and work product.

Regardless of how future ACA-related litigation and legislation play out, life care planners and life care plans can be expected to continue to play an important role in personal injury negotiations and settlements. As a result, life care planners are likely to remain strategic analytic collaborators and work product contributors for structured settlement consultants and personal injury settlement planners.