Beyond Structured Settlements

NAELA 2014 Annual Conference

"Avanti sempre avanti" - forward always forward!

Michael Amoruso, provided this impromtu theme for the National Academy of Elder Law Attorneys (NAELA) 2014 Annual Conference while accepting NAELA's Theresa Award in recognition of his advocacy and support of individuals with disabilities. Other 2014 NAELA award winners:

• Powley Award: Marielle Hazen - in recognition of her commitment to promote a greater understanding of the rights and needs of the elderly and people with special needs and of how Elder Law attorneys advocate for those rights.
• John Regan Writing Award: Alfred Chiplin, Jr. and Bethany Lilly - honoring the author(s) of the best article published in the NAELA Journal during the past year. S2KM reviewed their article about the impact of the Affordable Care Act (ACA) on Medicare in a prior blog post.

Amoruso's conference theme seemed appropriate as NAELA quickly celebrated its accomplishments, then focused the majority of its May 21-24 Scottsdale, Arizona educational program addressing multiple strategic challenges.

Accomplishments and Resources

NAELA was the first and remains the largest U.S. professional association focused on the needs of elder and special needs law attorneys. NAELA was founded in 1986 and now consists of more than 4300 attorney members. 250 members attended NAELA's 2014 Annual Conference which also featured 22 exhibitors.

In their respective speeches, outgoing NAELA President Howard Krooks and incoming President Bradley Frigon highlighted NAELA's most recent accomplishments: historically strong financial financial surplus including a well-funded NAELA Foundation; re-vamped educational programs including new online tools and interactive learning; a public policy advocacy program more focused and linked with member practices; two NAELA sponsored congressional bills: the Special Needs Trust Fairness Act (H.R. 2123 and S. 1672) and Disabled Military Child Protection Act (H.R. 2249 and S. 1076).

NAELA's resources are extensive and provide exceptional membership value. In addition to the NAELA Foundation, they include: the NAELA Journal plus additional publications; Aspirational Professional Standards modeled on the ABA Model Rules of Professional Conduct; a website featuring a comprehensive library and hosting NAELA's active online community; seven practice sections; 23 committees; state chapters; multiple educational conferences and certification programs; frequent webinars; multiple annual awards, plus a large and efficient staff.

Strategic Challenges

Despite its historic success, NAELA and its members face several strategic challenges.

• Although NAELA's client communities continue to grow, so does competition from non-NAELA member elder law and special needs attorneys as well as non-attorneys and websites offering legal forms. Most state bar associations have formed "elder law" sections which also compete with NAELA.
• NAELA was slow to embrace special needs as a separate strategic market. As a result, NAELA members formed the Special Needs Alliance (SNA) and the Academy of Special Needs Planners (ASNP). Many ASNP and SNA members, however, remain NAELA members.
• Additional challenges and changes: 1) the still uncertain impact of the ACA; 2) a permanent increase in the federal estate tax exemption to $5.34 million reducing the need for estate-tax related planning; 3) continuing decreases in traditional non-ACA government benefit (funding) resources; and 4) "commoditization" of several traditional elder law practice areas.

NAELA 2014 Annual Conference Educational Program

Responding to these strategic challenges, NAELA organized its 2014 Annual Conference to address two primary issues: 1) the future needs of persons with disabilities; and 2) the future of elder law. Both issues were featured is general sessions and supported with multiple break out sessions.

Two articles featured in the most recent issues of the NAELA Journal also addressed these issues:

• "The Future of Planning for Persons with Disabilities" - by Kevin Urbatsch and Michele Fuller.
• "NAELA Report and Recommendations: Preparing the Academy for a Rapidly Changing Future" - co-authored by several NAELA Board members and past Presidents.

General Sessions - Topics and Speakers

• Kruse Ethics Lecture - Ethics of Ancillary Practices - Margaret Lodis
• Alzheimer's Research Findings - William J. Burke, MD
• Future Needs of People with Disabilities - Michele Fuller and Kevin Urbatsch
• The Future of Elder Law - Thomas Begley, Jr. and Colleen Caruso
• An Outsider's (Sponsors') Perspective - Chad Fotheringham and Bridget O'Brien Swartz
• Case Law Update - Professor Rebecca Morgan, Edwin Boyer, Craig Reaves, Howard Krooks, William Browning
• Multiple Sclerosis and other Neurological Disorders - Stephen Dale and Bonnie Danowski

Breakout Sessions - Topics and Speakers

• Middle Class Estate Planning - Bernard Krooks
• Fiduciary Litigation - Sharon M. Rivenson Mark
• Medicaid Fair Hearings, Federal Court Proceedings and Appeals - William J. Browning, Shirley Berger Whitenack, Patricia E. Kefalas Dudek
• Trust Review Process - Michele Fuller
• ACA and Special Needs Planning - Kevin Urbatsch
• Uniform Adult Guardianship and Protective Proceedings Jurisdiction Act - Catherine Anne Seal and David M. English
• Incorporating Financial Planning and Services into Elder Law Practice - Andrew Hooks and Mark Munson
• Acting as a Fiduciary - Robert Fleming and Robert Fechtman
• Special Needs Planning - Mary Schmitt Smith and Theresa Varnet
• The Future of Estate Planning - Jonathan Blattmachr
• Life Care Planning - Jerold E. Rothkoff, Esq., Beth A. Prather
• Domestic Asset Protection - Jonathan Blattmachr

Structured Settlements

With few exceptions (e.g. S2KM blog author Patrick Hindert's presentation at the NAELA 2013 Annual Conference) neither structured settlements nor personal injury settlement planning receive much attention at NAELA conferences.

The words "structured settlement" were mentioned one time during NAELA's 2014 conference presentations - by Thomas Begley Jr. in reference to changes resulting from the ACA.

Unfortunately, many NAELA members view structured settlements negatively despite familiarity with the concept and a general affinity for annuities. More specific reasons:

• Many NAELA members
  • Believe defense brokers "over-structure" settlements before actual settlement planning can occur.
  • View Qualified Settlement Funds (QSFs) as positive and under utilized as a result of defense broker resistance.
• Many NAELA members view structured settlement brokers generally as:
  • Product and transaction focused instead of planning and client focused.
  • Annuity sales persons rather than professionals interested in understanding issues and solving problems.
  • Failing to adhere to professional standards such as full disclosure, product suitability and informed consent.
• For many NAELA members, the secondary market contributes to their negative view of structured settlements.

Special Needs Planning

When NAELA members discuss special needs planning, many tend to think about developmental (as opposed to personal injury) disabilities. Examples: 2014 NAELA conference presentations discussed Alzheimer's Research, Multiple Sclerosis and Autism statistics - without discussing serious tort-related injuries such as spinal chord or brain damage injuries.

Part of the reason: many first generation special needs attorneys entered this field because of their own child's developmental disability. Life insurers have contributed to this special needs dichotomy (developmental vs. personal injury) by creating completely separate departments for: 1) special needs; and 2) structured settlements.

Conclusion

NAELA has performed an important member service by incorporating its strategic planning into its educational programs and publications. Structured settlement and settlement planning professional associations would benefit their own members by following NAELA's example.

For S2KM summaries of other 2014 professional conferences, see the structured settlement wiki.

Affordable Care Act - 1

The Affordable Care Act (ACA) refers to two controversial laws enacted in March 2010, the Patient Protection and Affordable Care Act and the Health Care Education and Reconciliation Act, which restructure the fundamental relationship among government, health care providers and health care recipients and profoundly impact persons with disabilities.

Although some Republicans in Congress still threaten to repeal the ACA, the Supreme Court upheld almost all of the ACA's provisions in 2012, including the individual mandate and elimination of pre-existing condition restrictions, which will become effective nationally on January 1, 2014.

How will the ACA impact personal injury damage awards, settlement planning and structured settlements?

Professional associations whose members engage in settlement planning have already begun to address these issues:

• Speakers at recent Academy of Special Needs Planners (ASNP) annual educational conferences (Cynthia Barrett in 2011, David Lillesand in 2012 and Scott Solkoff in 2013) explored these issues in the context of special needs planning.
• The National Academy of Elder Law Attorneys (NAELA) devoted the Spring 2011 issue of its NAELA Journal to the impact of the ACA on Elder and Special Needs Law attorneys and their clients.
• The Society of Settlement Planners (SSP) will feature a presentation by Thomas Begley titled "The Impact of the ACA on Personal Injury Settlements, Structured Settlements and Special Needs Trusts", plus a related panel discussion, during its 2013 Annual Meeting.

Recent research papers and law review articles have further expanded analysis of these strategic ACA issues. One such research paper, titled "Potential Effects of the Affordable Care Act on the Award of Life Care Expenses" and written by Joshua Congdon-Hohman and Victor A. Matheson, was published September 2012 as part of the College of the Holy Cross, Department of Economics, Faculty Research Series (Paper No. 12-01).

Their paper argues: "the ACA may well have indirectly resulted in a great deal of tort reform" and, as a result, "awards in personal injury cases could be dramatically impacted" because:

• Future medical expenses represent a significant element of damages in many personal injury cases.
• When the ACA is fully implemented in 2014, all individuals will be required to purchase health insurance or pay a penalty.
• The ACA provides insurance premium subsidies for low income individuals who do not receive health insurance through the government or from a family member’s employer.
• The ACA prevents price discrimination based on health status and bans annual and lifetime expenditure limits.
• Most individuals will pay the same cost for health insurance before and after an accident.
• The legal maximum out-of-pocket expenses allowable under the ACA is $5,950 per year.
• The goal of tort law is to make the plaintiff "whole".
• Funding of health care through private insurance is a valid methodology for accomplishing this goal now that the ACA makes those markets available to injury victims.
• Therefore, the ACA:
  • Should simplify and reduce calculations of future medical damages;
  • By limiting those costs to "[health insurance] premiums and out-of-pocket limits less any pre-injury expected medical costs and penalties if uninsured."

What about the "collateral source rule"?

Congdon-Hohman and Matheson, who are economics professors, acknowledge a collateral source issue is "at play" and "remains of significant importance". They argue, however, "there is reason to believe the ACA changes the underlying reason of excluding collateral source compensation from inclusion in tort cases."

More specifically, the authors maintain: "removing existing health insurance coverage from exclusion under the collateral source rule would not significantly affect health insurance coverage rates reducing the economic rationale for having a collateral source rule in place for health insurance."

In their paper, Congdon-Hohman and Matheson highlight additional provisions of the ACA which they believe will impact many life care plans:

• ACA provisions limiting growth of premiums and medical costs:
  
  • Limits on insurers' non-care based expenses.
  • Formal requirements to justify rate increases.
  • New standards to lower administrative costs.
  • Funding for new wellness and prevention strategies.
• ACA provisions reducing the tax deductibility of medical costs:
  • Reductions in eligible expenditures and nominal limits for flexible spending accounts.
  • An increase in the deductible medical expense threshold from 7.5 percent of adjusted gross income to ten percent.
  • An an excise tax on “taxable medical devices.”

As a related result of the ACA, Congdon-Hohman and Matheson believe 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.

Cogdon-Hohman and Matheson's research paper provides a valuable educational resource for all personal injury stakeholders. For settlement planning professionals who are attempting to understand how the ACA impacts personal injury damage analysis, negotiation strategy, work product, and funding options, this paper should encourage expanded industry discussion and analysis.

For S2KM's complete reporting and continuing commentary about the ACA, see the structured settlement wiki. For a comprehensive analysis about structured settlements and government benefits, see Chapter 15 of "Structured Settlements and Periodic Payment Judgments"(S2P2J).