If you have been classified as having a permanent partial disability, and you were injured before March 13, 2007, you are eligible to receive WC lost income benefits for the rest of your life. If you were injured on or after March 13, 2007, you are eligible to receive WC lost income benefits for a maximum period set forth in the law.
No matter when you were injured, you are eligible to receive medical care necessary to treat your work-related injury, at no cost to you, for the rest of your life. We will refer to this as “future medical treatment.”
Self-insured employers and WC insurance companies worry about these classified cases. We will refer to them as “WC carrier.” Because you may be entitled to collect lost income benefits for a long time, and because the cost of future medical treatment increases regularly, the potential cost to the WC carrier could be great.
WHAT IS THE TYPICAL RANGE OF A LUMP SUM SETTLEMENT?
A WC carrier will sometimes agree to pay you one lump sum in FULL and FINAL settlement of your WC case.
For clients who were injured before March 13, 2007, a typical lump sum settlement is an amount between five and ten years worth of your lost income benefits. For example, if you receive a lost income benefit of $325/week, the typical range of settlement would be $84,500 (five years worth) to $169,000 (ten years worth).
For clients who were injured on or after March 13, 2007, a typical lump sum settlement will depend on several factors including the maximum period that the client can collect lost income benefits as set forth in the law.
DOES THE WC CARRIER HAVE FUTURE OBLIGATIONS TO ME?
It depends. Sometimes, the WC Carrier will agree to settle only the lost income portion of a case while leaving the medical portion intact. If such a settlement is approved, the WC Carrier will NEVER owe you additional lost income benefits but will remain responsible for future medical treatment. Most commonly, however, settlements resolve both the lost income and medical portions of a case. Under the latter agreement, the WC Carrier will NEVER owe additional lost income benefits and NEVER be responsible for future medical treatment.
WILL I NEED FUTURE MEDICAL TREATMENT AND, IF SO, WHO PAYS?
One of the most important issues you must consider is whether you will need future medical treatment and, if so, who is going to pay for it.
Medicare is the government’s health insurance program. People who collect Social Security Retirement benefits, and some people who collect Social Security Disability benefits, are eligible to participate in Medicare. If you applied for or are receiving Social Security benefits, we are required to consider Medicare’s interest.
If you settle your WC case, you receive money and relieve the WC carrier of their obligation to pay for future medical treatment. Medicare will not pay for future medical treatment unless their interest is considered as part of the settlement the WC case. Stated another way, Medicare will not pay for future medical treatment that, but for the settlement, would have been paid by the WC carrier.
WHAT PORTION OF THE SETTLEMENT IS FOR FUTURE MEDICAL TREATMENT?
To consider Medicare’s interest, we must have a qualified person evaluate what portion of the WC settlement is for future medical treatment. Once this portion is determined, and approved by Medicare, you will be required to “set aside” this portion in a separate bank account that can be used only for future medical treatment. This is commonly known as a Medicare Set Aside Arrangement [“MSAA”].
Medicare will NOT pay for future medical treatment unless you follow the MSAA rules AND prove that you are out-of-pocket for future medical treatment in an amount equal to or greater than the amount of the set aside.
DOES MEDICARE HAVE TO APPROVE ALL LUMP SUM SETTLEMENTS IN ADVANCE?
Not all WC lump sum settlement agreements have to be approved by Medicare. If Medicare advance approval is necessary, the approval process easily could take one year or more.
Medicare’s advance approval is required ONLY if the settlement is $250k or more (for persons not already enrolled in Medicare but who have a reasonable expectation of Medicare enrollment within 30 months of the settlement date) or if the settlement is $25k or more (for persons already enrolled in Medicare).
If the WC lump settlement is under $250K, and the parties agree NOT to secure Medicare’s approval in advance, there is a risk that Medicare will decide that the amount of the set aside for future medical treatment is NOT enough to protect their interest. This could impair your right to have Medicare pay for future medical treatment after you exhaust the amount of the set aside.
WHAT ABOUT PRIVATE HEALTH INSURANCE?
Every private health insurance contract is different. Thus, you would have to look to the terms of the policy first.
That being said, it is possible that a private health insurance company likewise would refuse to pay for any future medical treatment unless you prove that you are out-of-pocket for future medical treatment in an amount equal to or greater than the amount of the set aside.
If your work related injury is preexisting, a private health insurance company may refuse to insure you or may preclude you from being covered for any future medical treatment.
WILL A LUMP SUM SETTLEMENT OF THE WC CASE AFFECT MY SSD BENEFITS?
Payments made in settlement of your WC case will be considered by the Social Security Administration [“SSA”] in deciding on the amount of any Social Security Disability [“SSD”] benefit that you may receive. The terms of the WC settlement are not binding on SSA. SSA will make its own decision about the amount of your monthly SSD benefit.
If you are already collecting SSD benefits, finally settling your WC case may mean that your SSD benefits will be reduced. As a general rule, you cannot collect more than 80% of your pre-disability income when you add together your SSD and WC benefits.
SSA has three different ways to calculate the amount of your pre-disability income. In fact, they allow you to use the way that produces the HIGHEST amount of pre-disability income. For most people, the highest amount of pre-disability income is determined by calculating your average monthly (gross) earnings during the five consecutive years that you earned the most money. The combined amount of your SSD and WC benefits CANNOT exceed eighty percent (80%) of that amount. If it does, SSA reduces your SSD benefit and NOT your WC benefit.
WHAT DOES A LUMP SUM SETTLEMENT AGREEMENT LOOK LIKE?
Effective 03/01/2016, the WC Board updated the forms and processes required when entering into a Section 32 agreement. For a model agreement used when settling both the lost income and medical portions of a case, see http://www.wcb.ny.gov/content/main/forms/c32.pdf For a model agreement used when settling the lost income portion of a case only, see http://www.wcb.ny.gov/content/main/forms/c32_I.pdf
When entering into either of these forms of settlement, the WC Board requires you to view a video entitled “Settling Your Claim” found here: http://www.wcb.ny.gov/Section32/section32.jsp#video
WHAT WILL BE THE ATTORNEY FEE FOR NEGOTIATING THIS AGREEMENT?
The amount of the fee that we will seek will depend on several factors including the amount of the settlement and the amount of time, effort and energy expended to secure that settlement. Any fee that we may request must be approved by the WC Board.
To help you estimate, you can expect an attorney fee in the range of 10-15% of the final settlement amount.
CAN I MEET WITH YOU ABOUT THESE ISSUES?
The implications of accepting a lump sum settlement of your WC case are far reaching. While we are happy to discuss these issues with you in person, please consider this important information before we meet.