Stage 3 – Structured Settlements – w/ MSA’s
6th NAMSAP Annual Meeting and Educational Conference
National Alliance of Medicare Set-Aside Professionals (NAMSAP)
September 30-October 1, 2010
Hyatt Regency Crystal City, Arlington, Virginia
The Role of Structured Settlements
&
Medicare Set-Aside Arrangements (“MSA”)
Presentation by
Patrick J. Hindert
Managing Director
The Settlement Services Group, LLC
pjhindert@tssg.net
S3 Business Model
9/17/2010
Copyright © 2010 The Settlement Services Group. All Rights Reserved.
1
Stage 3 – Structured Settlements w/ MSA’s
Where do we fit in?
S3 Business Model
Chart by US Rep. Kevin Brady, (R-TX), July 2010
9/17/2010
Copyright © 2010 The Settlement Services Group. All Rights Reserved.
2
Structured Settlement: Definition
“We have the Answers”
What is a Structured Settlement?
“Structured settlement” is defined for tax purposes
in IRC Section 5891(c)(1). A claimant-centric
structured settlement may provide a potential
financial solution and security, featuring promised
periodic payments, in lieu of a single lump-sum.
“Structured Settlement and Periodic Payment
Judgments” by Daniel W. Hindert, Joseph J.
Dehner and Patrick J. Hindert, illustrates
structured settlements with the following diagrams:
Diagram 3.3 Annuity Financing
RELEASE FROM TORT LIABILITY
DEFENDANT
OR ITS INSURER
CLAIMANT
PO
LI C
Y
AN
NU
ITY
PR
EM
I
UM
S
FIT
NE
BE
HT
ITY
IG
NU
LR
AN
UA
CT
RA
NT
CO
CT
E
DIR
AN
NU
ITY
NO
DUTY TO MAKE PERIODIC
PAYMENTS
ANNUITY ISSUER
S3 Business Model
9/17/2010
Copyright © 2010 The Settlement Services Group. All Rights Reserved.
3
Structured Settlement: History
“We have the Answers”
Stage 1
“Lump-sum”
• Single
Hallmark Recovery Rule
“Cash &
Functions Close”
• Exceptions:
Work Comp
No-Fault
1965-1975
Regulatory
Government
Benefits
1975-1981
1982 Stage 2 - Structured Settlement
“Claim Management Era”
•
•
•
•
•
1982-1987
1988-1994
OBRA ’80
CMS
Social
MSP Regs
Security Act Incl. Medicare
42
CFR
411.46
Secondary
Medicare/
Medicaid Payer Act (MSP)
Taxation
State
Legislation
Financial
Interest Rates/
Credit & Regs
Structured
Settlement
Revenue
Rulings
Model
Periodic
Payment of
Judgments
Act
Periodic
Tax
Payment
Reform
Settlement Act
Act
CA
Supreme
Court
approves
MICRA
2001-2005
TAMRA
2006-2007
CMS ‘01
Issues MSP
‘Patel’ policy memo
(1st of 14 memos)
Small
Rev Proc
Bus. Job
93-34
(Re: 468B) Protection
Act ‘96
Uniform
Periodic
Payment of
Judgments
Act
Uniform
Prudent
Investor
Act
Revised
UCC
Article 9
Tax Payer
Victims of
Relief Act ‘97 Terrorism Tax
(WC-§130QAR)
Relief Act
US
v.
Baxter
Deficit
Reduction
Act
2008-2009
2010
MMSEA
enacted
Health Care
Reform
American Job
Creation Act
468B Regs
(IRS Project)
(‘911 Fund’)
Model State
Structured
Settlement
Protection
Act
NAIC Model
NY,FL,MA,MN Pennsylvania
NAIC Model
adopt S2
Rule 229.2
Unfair Trade Compensation
Disclosure disclosure rules
Protection Act
Statement
‘Dodd-Franks’
Interest
rates bottom
Credit &
Liquidity Crisis
Interest Rates
Peak
1st Transfer
Business
Standards &
Practices
Class Action
Lawsuits
1st of 48 state
S2 Protection
Acts
NSSTA adopts
Code of Ethics
LTR 83-3035
BaldwinUnited
Associations
NAELA
founded
HIPAA
Symetra
launches
Clearscape
NSSTA restricts
factoring by
Members
ABA Model Rules
NAELA adopts
Code of Ethics
Macomber v.
Travelers
Weil v.
Manufacturers
Insolvencies
S3 Business Model
1995-2000
Medicaid
Omnibus
Reconciliation
Budget Act
(§130 QAR)
Secondary
Market
Disclosure
•
•
•
•
•
•
Periodic Payments
Annuity Financing
Qualified Assignment
Defendant Control
“Gray Market”
2001 Stage 3 - Settlement Consulting
“Accountability & Planning Era”
Primary & Secondary Markets
Blended Products
Claimant-Centric Solutions
Multiple Stakeholders
Risk Analysis
Safe Harbors
Gramm
Leach
Biley
Grillo case
Saltzburg and
Chemerinsky
(’06 paper to ABA)
ELNY agreement
NASP founded
9/17/2010
SSP founded
Fresno
County
Cases
48 States
S2 Protection
Acts
SSP adopts
Standards of
Prof. Conduct
Spencer v.
Harford
First Executive/ Monarch
Executive Life Capital
(CA)
NSSTA
founded
Symetra
resigns
NSSTA
NAMSAP
founded
Joseph v.
City of NY
AIG bailout
Lehman Bros
bankruptcy
JG
Wentworth
bankruptcy
ELNY
(possible)
Insolvency
NASP 1st affiliate
conference
Copyright © 2010 The Settlement Services Group. All Rights Reserved.
4
Structured Settlement-Stage 3 (WorkComp- MSA- Secured Creditor)
“We have the Answers”
Primary (Creation) & Secondary (Transfer) Markets – Accountability and Planning
Key: Interested Parties
Primary Market
MSP/MSA
Compliance/
Advisory
Reporting
Claimant/Payee
$
w/ Periodic Payment Rights
$
Promise
to Pay $
Secondary Market
Secured Creditor
Post Settlement Transfer Agmt
w/ PPR Transfer Order
Redemption & Release Agreement
Employer/Insurer
Payments
Alternative Payees
Currently Primary Market Only
$
MSA
MSA Arrangement
Payments
Advisory/
Accounting/
Reporting
Post Settlement
PPR Transfer Order
Transfer
Notices
Medicare
Benefits
Discount Cash
Medicare Secondary Payer (MSP)
Enforcement/Procedure:
$
Redemption Order
Magistrate
CMS-Medicare
MSA Approval
MSA
Analysis
Premium +
Qualified
Assignment
Funding Company
/ Transferee
Structured Settlement $
§1862(b) of the Social Security Act,
{42 USC §1395y(b)(5)}
Assignee Assumes
Annuity
Ownership
42 CFR 411.46
‘Payment Obligation’
$
Premium $
Annuity Pledged to
Secured Creditor
Annuity Issuer
CMS Policy Memos
MMSEA
(reporting & fines)
Court
Premium +
Non-Qualified
Assignment
Post-transfer Annuity Payments
Residual Pre-transfer Annuity Payments
(Note: Few WC cases are accepted by Funding Co. to recycle)
Or
S3 Business Model
9/17/2010
Annuity Payments
Copyright © 2010 The Settlement Services Group. All Rights Reserved.
5
Stage 3 – Structured Settlements w/ MSA’s
CMS Policy Memoranda
Affecting any proposed settlement of a Worker Compensation case that closes
Future Medical Expenses
(dates & key summaries)
July 23, 2001
April 25, 2006
April 21, 2003
July 24, 2006
May 23, 2003
May 20, 2008
May 7, 2004
August 25, 2008
October 15, 2004
April 3, 2009
July 11, 2005
May 14, 2010
December 30, 2005
June 8, 2010
Note: See Hindert, S2KM, paper to NSSTA, ‘Structured Settlements and Medicare’
S3 Business Model
9/17/2010
Copyright © 2010 The Settlement Services Group. All Rights Reserved.
6
Stage 3 – Structured Settlements w/ MSA’s
Latest Rule Changes to Rated Age Submission
14May2010
Established overly broad discovery and production of proofs of
rated ages, and execution of a ‘Certification Statement’ by the structured settlement
consultant/agent, assuring that ALL rated ages from the dawn of time to the present,
have been discovered and revealed to CMS, irrespective of where they came from,
or what party had requested them, or when.
08Jun2010
The May 14, 2010, Rated Age (RA) “Certification Statement”,
revised by CMS, and must be used without modification. Certification to be
submitted by the structured settlement consultant/agent and/or submitting agency for
the MSA:
“Our organization certifies that all rated ages we have obtained and/or have
knowledge of regarding this claimant, and generated at any time on or after the Date
of Incident for the alleged accident/illness/injury/incident at issue, have been included
as part of this submission of a proposed amount for a Workers’ Compensation
Medicare Set-Aside Arrangement (WCMSA) to the Centers for Medicare & Medicaid
Services.”
S3 Business Model
9/17/2010
Copyright © 2010 The Settlement Services Group. All Rights Reserved.
7
What We Do
“We have the Answers”
The Settlement Services Group (TSSG) www.tssg.net helps defendants and other settlement
services stakeholders re-think & re-focus their business model for Stage 3 environment.
Patrick Hindert
Managing Director
p: 513-899-2100
pjhindert@tssg.net
Co-author “Structured Settlements and
Periodic Payment Judgments”
Former President of the National
Structured Settlement Trade
Association
50% Owner of TSSG
Leading “plaintiff exclusive”
structured settlement and settlement
services company
TSSG – Offering Stakeholders
Understanding of Claimant Dynamics
Former Executive Director of the
Society of Settlement Planners
Defense Services
Timothy Morbach
Director of Sales
p: 734-335-7452
ttmorbach@tssg.net
Recognized leader with 28
years of experience in the
Structured Settlement industry
Former Vice President of
Investments and Structured
Settlement Consultant for USB
Financial Services
Claimant Dynamics
• Settlement Planning
• Analysis
• Claim Management
• Planning
• Transactional Risk Avoidance
• Disclosure
• Disclosure
• Validation
Products
• 468B Advantage
• Implementation
• Monitoring
• 5891 Advantage
• MSA Advantage
• SNT Advantage
S3 Business Model
9/17/2010
Copyright © 2010 The Settlement Services Group. All Rights Reserved.
8
Contact Information
“We have the Answers”
Patrick Hindert
Managing Director
pjhindert@tssg.net
Phone: 513-899-2100
Mobile: 513-248-2452
The Settlement Services Group, LLC
(TSSG)
www.tssg.net
9057 Swigert Road
Loveland, Ohio
45150
Timothy Morbach
Director of Sales
ttmorbach@tssg.net
Phone: 734-335-7452
Mobile: 734-718-8718
Fax: 734-404-6276
16115 Weatherfield Drive
Northville, Michigan
48168-2316
Pat is co-author with Daniel W. Hindert
and Joseph J. Dehner of “Structured
Settlement and Periodic Payment
Judgments,” published by American
Lawyer Media
S3 Business Model
9/17/2010
Copyright © 2010 The Settlement Services Group. All Rights Reserved.
9