What You Forgot To Tell Your TPA

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Many self-insureds and carriers use Third Party Administrators as their front-line adjusters. A set of instructions or guidelines from the actual check-writer is supposed to regulate the TPA’s procedures. Anticipating every permutation of every possible situation is impossible, but every set of instructions should include guidance on when and how to use mediation.

Recently I had the opportunity to review a set of TPA instructions. The TPA was directed to “negotiate settlements of covered claims pursuant to the authority granted by” the contracting party. No further details were provided.  However, another section of the agreement spelled out in minute detail a procedure for mediation should a dispute arise between the TPA and its client. The client knew mediation was an important tool for resolving its own disputes, but provided no direction about how to use it to resolve covered claims.

The regional risk manager of one national account tried to get their local team of TPA workers compensation adjusters to try new dispute resolution techniques, but the adjusters refused. “If they want us to do that, they need to include it in their instructions.”

What Should TPA Instructions Say About Mediation?
“At appropriate milestones in the life of a claim, adjusters and attorneys should take active steps to initiate mediation and report on the results.

“These milestones include:

-Upcoming trial date
-IW has reached permanent & stationery status
-IW has reached age 61
-70% of indemnity reserve has been paid
-4 reserve changes within 2 years
-Case is more than 4 years old

“Additionally, claims handlers should attempt to close claims with mediation in:

-Death cases
-when the IW is acting in pro per

“Adjusters and attorneys are expected to participate in mediations with a good faith intention to negotiate and resolve pivotal issues.”

Making Sure Your C&R Is Approved: Itemize Offers to Assure Adequacy

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“Let’s see,” I said to the employer’s representative. “After deducting PDAs, the MSA, and attorney fees from this offer, the injured worker will end up owing you money.”

It happens more often than you might imagine. Usually it’s because the defense has forgotten the attorney’s fee. Then they wonder why the offer was rejected. Unless parties are in mediation, negotiation often stops.

Why You Need Adequacy
A settlement must be adequate. A recent case on the issue of settlement adequacy, Alvarenga v. Scope Industries, caught some workers compensation professionals off-guard. The court reversed approval of the settlement because after allowing for attorney fees it was inadequate to fund the MSA. Whether CMS approval of the MSA was sought was irrelevant.

California regulations mandate adequacy:
“The Workers’ Compensation Appeals Board shall inquire into the adequacy of all compromise and release agreements and stipulations with request for award, and may set the matter for hearing to take evidence when necessary to determine whether the agreement should be approved or disapproved, or issue findings and awards.”
8 CCR § 10882 Action on Settlement Agreement

Written Itemization Promotes Settlement
Itemized offers and demands help settle cases. When the PDAs, MSA and attorney fees are itemized in an offer, everyone can see how funds will be disbursed.California law favors written settlement offers. Attorneys must show clients written settlement offers and demands, California Rule of Professional Conduct For Attorneys 3-510, but need only convey oral offers if the attorney thinks the offer is “significant.” Written offers let the recipient easily and accurately convey the information to the ultimate decision-maker.Preparing an offer or demand requires review of indemnity issues, Medicare-eligible expenses, and non-Medicare-eligible expenses. Calculating the settlement parts separately can be an eye-opening exercise. Itemizing can show why the offer or demand is reasonable.

YOU HAVE TO GET OUT OF B-E-D TO SETTLE

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Maybe being in BED- Blame, Excuses, Denial- is really what’s blocking your ability to close claims.
Blame
It’s easy to blame the other side. “The adjuster/ defense attorney/ applicant’s counsel isn’t paying attention.”  “They’re keeping the case going for the wrong reasons.” Whatever. The only person you can control is you. Without casting aspersions, start communicating anew keeping the end in sight. This might mean sending an email AND a letter, calling and maybe texting. Bring in your favored mediator AND file a DOR.
Excuses
Let go of the past. Maybe you made a mistake or missed an opportunity which would have set the claim on a better course. How much could you have settled that claim for 4 years ago? Resolve to start over today.

Denial
Get serious about evaluation. You can’t properly manage a claim if you shut your eyes to the true cost of keeping it open. In “old dog” cases, medical expenses almost always go up. Even when a drug is scheduled to go generic, a new, better, expensive drug becomes available. A settlement has to cover the injured worker’s future claim-related medical expense. Six percent is not a realistic discount rate. On the other hand, let’s be honest about what treatments the injured worker will actually use.

Get Out of B-E-D Now
Changing your attitude can change your results.

Maybe you made a mistake or missed an opportunity which would have set the claim on a better course. How much could you have settled that claim for 4 years ago? Resolve to start over today.

5 Best Benefits of Workers Compensation Mediation

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1) Mediation Works.  In one study, 61 percent of workers compensation mediations resulted in total resolution of the disputed issues.

2) Mediation is fast- no waiting for a hearing date on an overcrowded court schedule.

3) Take as much time as you need- no rush to finish within a half-day window at the WCAB.

4) Mediation saves time and money compared to numerous, futile court appearances.

5) Presence of the neutral can help preserve the attorney-client relationship and inject a dose of reality.

Cannibal Negotiation

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Cannibal negotiation refers to a deal where parties figure out how to get money from an entity not at the table.

The term originates from an arrangement where OldCo paid NewCo to keep NewCo’s cheaper, competing product off the market. NewCo is paid for not selling anything. The buyers who need that product have to pay OldCo’s high price. The buyers are being cannibalized.

Honest disagreement can thwart parties’ good intentions to reach a workers compensation settlement. Cannibal negotiations can ethically resolve disputes over the value of future medical benefits.

The first place a true cannibal negotiator should turn is Medi-Cal. Medi-Cal can fill the gap between parties’ valuations and provide a safety net to pay for the injured worker’s health care at no cost to any party. A special needs trust or structured settlement may be needed to keep an applicant eligible for traditional Medi-Cal. Under expanded Medi-Cal, the applicant can receive a settlement of any size without losing eligibility so long as Modified Adjusted Gross Income is under the limit. Caution: home health care and non-emergency medical transportation are not included in expanded Medi-Cal. 

Medicare is the next source a cannibal should think of for a funding entity not at the negotiating table. Medicare is different from Medi-Cal in that the injured worker had to contribute the required number of quarters to achieve eligibility. Also, a Medicare Set-Aside must be depleted before additional funds can be tapped to pay for a claim-related Medicare-eligible expense.

Lastly, the parties may be able to use part of the settlement to fund health insurance premiums for the injured worker. A health insurance agent can provide a quote for Affordable Care Act coverage regardless of the injured worker’s pre-existing condition. A (cannibalized) subsidy may indeed keep the premium cost affordable.

Cannibal negotiators can “prey” on more than one source. Some applicants are “Medi-Medi”, enrolled in both Medicare and Medi-Cal. MSAs should not be tapped until the applicant is eligible for Medicare; for the period up to 30 months before then, Affordable Care Act insurance can provide coverage.

Tricks of the Settlement Trade

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Negotiations can founder when parties (and some mediators) don’t know the tricks that remove settlement obstacles.

Structured Settlements

Structured settlements are ideal for funding Medicare Set-Asides. Structured settlements provide tax-free periodic payments over a specified period of time, which can be for the life of the injured worker. The structure costs less than lump-sum funding, freeing up the balance of the employer’s authorized settlement amount for the injured worker’s other needs. What’s more, unlike with lump-sum funding, lifetime payments cannot be exhausted. The injured worker receives the amount paid by the employer plus income earned from professional investment management. This trick can help bridge a negotiation gap.

From time to time I hear that a structured settlement broker was not called in order to avoid expense. This reflects a fundamental misunderstanding of how structures work. There is no cost to consult a structured settlement broker. The structured settlement life insurance company (not any party) pays the broker a commission if a structure is placed.

A structured settlement is not the right choice for every case.  But workers compensation professionals should always investigate this no-risk option.

Special Needs Trusts

Many injured workers and their families rely on Medi-Cal for their non-industrial medical needs.  However, receipt of a large sum pursuant to a Compromise & Release can disqualify the injured worker’s entire family from receipt of these benefits until funds are spent down. Placing settlement funds in a Special Needs Trust allows the injured worker to retain public benefits and still C&R the claim.

Pooled Special Needs Trusts are similar to an attorney trust account in that the trustee pays expenses from a fund holding money for many participants. Compared to a single-beneficiary trust, pooled special needs trusts are inexpensive and quick to set up and administer.

Professional MSA Administration

Did you know professional MSA administration which protects the injured worker’s continued access to Medicare benefits is available for little or no cost? One of the biggest faults of the Medicare Set-Aside system is its reliance on self-administration. Administration mistakes can jeopardize the injured worker’s continued access to Medicare.

Injured workers are more often laborers than MBA’s.  Determining which expenses are Medicare-eligible is complicated and requires constant vigilance as policies change. To retain benefits, the MSA beneficiary must submit an annual report, a burden many injured workers cannot handle. Knowing who to call to obtain free or low-cost professional administration, including reporting, can mean the difference between an open claim and a Compromise & Release.

Reversionary Trusts

The reversionary trust is probably the least used settlement trick.  When parties disagree about future medical needs, a reversionary trust can satisfy both sides’ interests.  A reversionary trust can pay for claim-related medical expenses over a specified time.  If the money is not needed, at the conclusion of the trust the money reverts to the payer.

Some adjusters object that there is no way to account for refunded amounts without leaving the claim open. Applicants may balk at the lack of unfettered access to trust funds. I had one case where the prospect of a reversionary trust caused the claimant to reduce the demand on condition the money was paid in cash now; the case promptly settled.

With the right parties, a reversionary trust is a solution which allows everyone to be right. Or just raising the possibility can get parties to settle.

There Are Many More Tricks

Every workers compensation professional in the process from Notice of Injury to Compromise & Release has a distinct role. If you are considering closing the claim, it’s time to bring in the person whose focus is settlement, a knowledgeable mediator.

Does This Mediation Make Me Look Fat?

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Nobody wants to look bad. Turns out some workers compensation professionals think recommending mediation makes it look like they couldn’t get the claim settled themselves. Mediating a claim doesn’t make you look bad. It makes you look smart.
Are You A Litigation Expert?
Most claims settle. Mediation makes it happen sooner.Litigation experts realize that going to trial on an issue risks losing it all. It takes a long time to get to trial; meanwhile the claim gets expensive (how many medical exams do you really need?) Facts may become less favorable.Parties in mediation retain control of the outcome rather than surrender to an unpredictable result.  Often I help parties invent a solution they had never previously considered.

A Safe Place for Bad News
Attorneys may be hesitant to deliver bad news. One fear is that the client will get new counsel. Mediation provides a forum for a neutral person, the mediator, to deliver the message.  The attorney can commiserate with the client, look like a hero, and yet get the case settled.

How Good Do you Want To Look?
I have successfully helped parties settle even when negotiations stalled in prior informals.  With a mediator’s help, parties (even skeptical ones) who come to mediation willing to settle on acceptable terms generally do settle. The next time the professional who mediated comes up for evaluation, that person doesn’t look bad—that person looks great.

What You Don’t Know About EAMS

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eams logo

The lawyer told me, “I can only see the cases where I’m the attorney of record.”

The hearing rep told me, “I don’t have access to EAMS.”

Wrong and wrong.

It’s a Government Database

EAMS is a PUBLIC database of filed California Worker Compensation cases. Anyone can log in to https://eams.dwc.ca.gov/WebEnhancement/ to see case information. You might only need the Applicant’s name at the initial search screen. Often, though, you need another piece of data, such as the Applicant’s date of birth, to distinguish among people with the same name. The system shows where the Applicant resides, so that might help you sort through Applicants with common names.

The site requires users to identify themselves (though there does not seem to be any way to verify the i.d.) and choose from a list of reasons for making the request. I always choose Case Information Search, but you get the same information regardless of which reason you choose.

The next screen shows you the employer, the Date of Injury including if it was cumulative, and the case location. You can then click through to see the next hearing date, the claimed body parts, and the parties of record including lien claimants. Clicking again on “View Events” will show you what has been filed and on what date, including stipulations and Compromise & Release documents.

How EAMS Research Helps

Workers Compensation professionals may want to check on other claims by the same Applicant for a number of reasons. Right at claim intake, attorneys may want to confirm whether the Applicant has prior (or later) filings, the claimed body part, and the case status. Perhaps you want to see if there were prior attorneys on the file, or just make sure you are aware of all the players. There is no reason to be unaware of apportionment issues when this data is publicly available. Once you realize the extent of information available, you will want to research the public EAMS database regularly.

How Did You Get To That Number?

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Case evaluation is part art and a lot of math. We’re not talking calculus; we’re talking arithmetic.

A surprisingly large number of lawyers tell me they’re bad at math. They’re not alone. CNN anchor Chris Cuomo recently got his math corrected by his co-anchor Michaela Pereira while discussing Powerball lottery numbers.
 

You can’t come up with a realistic evaluation of a Workers Compensation claim if you can’t quantify the component parts: Permanent Disability, Life Pension, and Medicare-eligible and non-Medicare-eligible Future Medical.

In mediation caucus, when parties give me their offer or demand I often ask, “How did you come up with that number?” I want their best argument that will convince the other side. The first answer I get is often vague, like “We thought it would settle the case.” Workers compensation professionals often neglect running the numbers. Getting parties to see the same numbers moves them to settlement.

I recently got a call about an offer in a personal injury case. I questioned the plaintiff’s attorney about what he thought this number represented. It didn’t sound right to me. “Did you ask them how they came up with that number?” No, he hadn’t. I suggested the attorney ask opposing counsel that question to allow movement forward toward settlement.

Random demands and offers are unlikely to settle a claim. Before you assume the other side is being unreasonable or you respond, ask: How Did You Get To That Number?

3 Signals It’s Time to Close the Claim

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Some Workers Compensation Claims seem to have a life of their own. Before you know it, years have passed since the Date of Injury. Here are 3 signals telling you to take a hard look at settling now. The Injured Workers is 61 years old. Once an injured worker reaches age 62½, any buy-out of future medical […]

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