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The Structured MSA "Metaverse" | The Rapture v Raptor Episode

by Structured Settlement Watchdog

It's the time of Rapture. Not just THE Rapture, but 41 years ago last week, the last time inflation reached current levels, Rapture, by Blondie was finishing up a two week stretch at #1 on the Billboard Hot 100.  In the Structured MSA "metaverse" there are no "Men from Mars eating cars and eating bars" but a blog from one company suggests that there is the Raptor, or Raptors, velociraptors to be precise, just like in Jurassic Park. Technically speaking however, in real life however, a Velociraptor was roughly the size of a turkey, considerably smaller than the approximately (6+1⁄2 ft) tall and 80 kg (180 lb) reptiles seen in the Jurassic Park films.

Invasion of the Turkeys

So, when a company writes in block capitals " THE BEST WAY TO SAVE ON MSAS MAY HAVE JUST BECOME THE ONLY WAY: STRUCTURES!" accompanied by the picture below, has ANYONE considered that it could be interpreted as "invasion of the turkeys"?

"Invasion of the Jurassic Turkeys"?

"Velociraptor was just a scary turkey, say scientists"

"In a study of the fossilized forearms of velociraptors found in Mongolia in 1998, paleontologist Mark Norell of the American Museum of Natural History found "quill knobs" - bumps where the feathers used for flight in modern birds are anchored to the bone with ligaments. His results were published in 1998 in the Journal Science.

"The more that we learn about these animals the more we find that there is basically no difference between birds and their closely related dinosaur ancestors like velociraptor," said Professor Norell.  The Guardian, Alok Jha, Science correspondent September 21, 2007

Velociraptors were " speedy thieves"

In 1924, Henry Fairfield Osborn, then-president of the American Museum of Natural History, named Velociraptor. He bestowed the name on this dinosaur, which is derived from the Latin words "velox" (swift) and "raptor" (robber or plunderer), as an apt description of its agility and carnivorous diet.    Source:  Velociraptor: Facts About the 'Speedy Thief' By Joseph Castro published March 18, 2016

Velociraptors did not hunt and packs

It's also worth noting that Velociraptors did not hunt in packs as the above picture suggests. Research from University of Wisconsin Oshkosh revolves around an analysis of raptor teeth that shows Velociraptors did not hunt in coordinated packs. "Raptorial dinosaurs often are shown as hunting in packs similar to wolves," said Joseph Frederickson, a vertebrate paleontologist who led the study with Michael Engel and Richard Cifell.

Facing Bemusement with Amusement

When promoting Structured MSA, the devil is in the details. You know "a picture tells a thousand words".  A Structured MSA has tremendous benefits, but a mural of "scary turkeys" known as "speedy thieves" in the scientific community, does not showcase the characteristics that I would have in mind to promote them.  How about you readers?

 

 

 

 

 

 

 

What is a Structured MSA?

by John Darer CLU ChFC MSSC CeFT RSP CLTC

A Structured MSA, or Structured Medicare Set Aside account is often the most cost efficient way to fund

According to the CMS  Workers Compensation MSA  (WCMSA) Reference GuideVersion 3.0, published October 10, 2019, a WCMSA can also be established as a structured arrangement, where payments are made to the account on a defined schedule to cover expenses projected for future years. In a structured WCMSA, an initial deposit is required to cover the first surgical procedure or replacement and two years of annual payments. The initial deposit (“seed money”) is followed by subsequent annual deposits (or a shorter time period if CMS agrees to such), based on the anniversary of the first deposit. If in any given coverage year the deposited funds are not exhausted (i.e., used up, spent), they are carried forward to the next period and added to the next annual deposit. The whole fund, including carry-forwards, must be exhausted before Medicare will pay primary for any WC injury-related medical expenses. If the fund is exhausted appropriately in a given annual period, Medicare will pay primary for further WC injury-related medical expenses during that period. In the next annual period, the replenished WCMSA funds again must be used, until the WCMSA amount is appropriately exhausted. 

The savings from using a Structured WCMSA is so great that it can finance the cost of professional MSA administration and still have money left over when compared to an all cash MSA.

Workers Compensation Medicare Set Aside | The Case For Professional Administration of MSA

by John Darer® CLU ChFC MSSC CeFT RSP CLTC

What is a Medicare Set Aside Arrangement (MSA)

A Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) is a financial agreement that allocates a portion of a workers’ compensation settlement to pay for future medical services related to the workers’ compensation injury, illness, or disease. These funds must be depleted before Medicare will pay for treatment related to the workers’ compensation injury, illness, or disease .

Once the funds in the WCMSA account have been exhausted and Medicare has been provided with information to document that payments from the account were appropriate, Medicare will begin paying for the beneficiary’s Medicare covered eservices that are related to the work related injury or disease. { Note that Medicare expenses that are not related to the work injury or disease are no affected by the WCMSA and are reimbursed by Medicare unless another entity under 42 U.S.C. 1395y(b) is primary payer.

For Medicare Set-Asides (MSAs), it is important to note that a Medicare Set-Aside allocates for all future medical and pharmacy expenses related to the work injury, that are covered and otherwise reimbursable by Medicare

The Argument for Professional Administration of Medicare Set Aside Arrangements  (WCMSA, LMSA or NFMSA)

Medicare Set Aside arrangements are intended to not only protect Medicare's interest, a requirement of the Medicare Secondary Payer Act (MSP), but to also protect the settling injured worker (or plaintiff if Liability MSA) from the loss of Medicare benefits. Ongoing compliance requires, among other things, keeping track of medical bills, sorting through and having the knowledge to determining what procedures, equipment and medication is covered by Medicare and filing attestations.  Compliance requires attention to detail that the injured workers or personal injury victim may not be able to, or willing to handle. A number of professional administrators charge cost efficient one time fees and some have harnessed technology and group buying discounts to enhance the value and accessibility to clients.  Call me at 888-325-8640 if you would like more details.

Long Beach CA Insurance Agent and Daughter Charged With Embezzlement and  Money Laundering of Injured Workers' MSA Funds

According to its July 21, 2017 press release, investigators with the California Department of Insurance Investigation Division, Tom Fallon, 63 and daughter Christina Fallon, 28 embezzled $273,954 from the injured workers who entrusted him to invest their Medicare set-aside settlement funds with his agency, Fortis Financial Insurance Services, Inc. Tom Fallon then simply diverted their funds into his own accounts, spending the money for their personal use, and with business ventures that include Big Daddy’s Cigar Lounge at 5844 E. Naples Plaza in Long Beach. CA. The Los Angeles County District Attorney's Office filed a criminal complaint against Tom and Christina Fallon on July 14, 2017, charging two counts of Theft by Embezzlement PC 504 and 487(a), and 15 counts of Money Laundering PC 186.10 including PC 186.11(a) (3) white collar crime enhancements. If convicted of all charges, the defendants face a maximum sentence of more than 16 years in state prison

By stealing from injured workers who depend on the funds for future care, the Fallons may have left many victims without the resources they need for medical treatment.”

A Structured MSA and a Professional Administrator Would Have Mitigated the Embezzlement Risk

It is unclear who advised the injured workers to use the Fallon's or Fortis. It does not appear that the MSAs that were the subject to the conduct that led to the  Fallons arrest were Structured WCMSA. One wonders what the applicant attorneys' advice was when settling the cases.  The amount of money that the victims could have saved between structuring the MSA and the discounts offered by certain administrators would be meaningful.

If you are thinking that embezzlement is a one-off consider this case where an improperly exhausted MSA by Sister while Claimant in Jail was not Dischargeable in Sister’s Bankruptcy  N RE DAVID K. JOUETT and SABRA B. JOUETT, Debtors. STEPHEN E. HUBANKS, Plaintiff, v. DAVID K. JOUETT and SABRA B. JOUETT, Defendants. Case No. 13-10005-M Chapter 7 Adv. No. 13-01015-M UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF OKLAHOMA 2014 Bankr. LEXIS 950 March 12, 2014, Decided

The July 10, 2017 release of the Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) Reference Guide Version 2.6 appends Section 17.1, the section covering MSA administrators, with a single sentence:

"Although beneficiaries may act as their own administrators, it is highly recommended that settlement recipients consider the use of a professional administrator for their funds."

Can you Fund a Structured MSA With a "Secondary Market Annuity"?

by John Darer CLU ChFC MSSC RSP CLTC

With a few settlement planners dabbling in structured settlement derivatives it won't be long before the question is raised about whether or not a Medicare Set Aside can be funded with structured settlement derivatives labeled " secondary market annuities".  A possible argument for is that such vehicles carry higher interest rates and thus can reduce the cost of the MSA even further than an annuity. 

You cannot fund a Structured  Medicare Set Aside arrangement with a  "secondary market annuity".   You cannot fund a Medicare Set Aside arrangement with a "secondary market annuity" because a "Secondary Market Annuity" is not an annuity.  A "Secondary Market Annuity" is a scam label for structured settlement derivatives.

The CMS Medicare Set Aside Self-Administration Tool Kit includes an attestation letter entitled "Worker's Compensation Medicare Set-Aside Arrangement (WCMSA)-Account Expenditure for Structured Annuity"   Download Account-Expenditure-for-Structured-Annuity-Attestation-Letter

The account holder must attest annually...choosing from one of the following

I the undersigned attest that I have a structured annuity WCMSA and have used the annual monies from the WCMSA account for the period of ____to ____ to pay for the following:

I the undersigned attest that I have a structured annuity WCMSA and have exhausted the annual money (and any applicable acrry-over from pevious years) in the WCMSA account for the period of ___ to ____ to pay for the following:

I the undersigned attest that I have a structured annuity WCMSA and have completely exhausted all monies in the WCMSA account to pay for the following:

Do you want to attest, or do you want to advise your client to attest, to having an "annuity" that is not, in fact, an annuity?

CMS Memo Q5  7/23/01  refers to "structured settlement"

• IRC 5891(C) defines structured settlement as follows:

(1) Structured settlement The term “structured settlement” means an arrangement—

(A) which is established by—
(i) suit or agreement for the periodic payment of damages excludable from the gross income of the recipient under section 104(a)(2), or
(ii) agreement for the periodic payment of compensation under any workers’ compensation law excludable from the gross income of the recipient under section 104(a)(1), and

(B) under which the periodic payments are—
(i) of the character described in subparagraphs (A) and (B) of section 130(c)(2), and
(ii) payable by a person who is a party to the suit or agreement or to the workers’ compensation claim or by a person who has assumed the liability for such periodic payments under a qualified assignment in accordance with section 130.

• IRC 5891(C)(2) defines the term “structured settlement payment rights” means rights to receive payments under a structured settlement. 

When doing at WCMSA allocation the CMS guidelines require that you Identify if the set-aside is paid out as a lump sum or an annuity. If the set-aside is paid out as an annuity, you must identify the following:

1. Name of the carrier

2. Cost of the annuity 

• the cost of the structured settlement derivative, which is not an annuity, is not the cost of the annuity from which the structured settlement payment rights are derived]
• in its 2016 WCMSA Guide Version 2.5, CMS says "If annuities are involved, use the lifetime payout amount in the total instead of annuity purchase price and include the annuity rate sheet to  support your calculation". 

3. Proposed initial deposit (seed money)

4. Minimum annual deposit for the balance of the claimant’s life

5. Annuity starting date

6. Length of annuity

7. Annual payout of annuity

8. Annual funding date

If That Wasn't Enough....

• Structured settlement derivatives are not able to make life contingent/lifetime payouts
• The cost of insurance to cover the potential of vacated transfer order could not be taken out of the MSA.
• The legal expenses to fight an attempt to vacate the transfer order or negotiate a rescission of an order cannot be charged to the MSA.
• Chopped up streams of income sewn together like a patchwork quilt are not an annuity.

What is a Rated Age with a Structured Settlement Annuity?

by John Darer® CLU ChFC MSSC CeFT RSP CLTC

A rated age is an important component of a structured settlement pricing when there are life contingent payments* such as:

• Pricing out and funding a life care plan
• Providing a backstop to a special needs trust or to an investment strategy
• Funding a Structured Medicare Set Aside Arrangement (MSA) at the maximum discount.
• Funding the temporary life elements of a New York CPLR 50A or 50B structured judgment such as future pain and suffering, or future medicals in excess of statutory thresholds.
• Funding lifetime retirement benefits or any other lifetime payment stream
• Longevity Insurance

A Rated Age Puts a Younger Person Into an Older Person's Body For Structured Settlement Pricing Purposes

Structured settlements are one place where acting your age (or less) results in more expensive pricing! Your good habits result in you being rewarded with a longer life, but a more expensive annuity.

To obtain the best rated age, it is important to take the time to have the structured settlement consultant review medicals before they send them to the annuity issuer. This helps to eliminate redundant reports and may identify salient points for the underwriter's consideration.

Period certain payments and guaranteed lump sum payments are not affected by a rated age. Such payments are guaranteed to be paid whether or not the payee survives the entire payment schedule.

Image: Dreamstime.com

Medicare Set Aside Arrangements | CMS Publishes Reference Manual Version 3.9 (2023)

by John Darer CLU ChFC MSSC RSP CLTC

The Center for Medicare and Medicaid Services ("CMS") published a helpful 175-page reference guide for Workers' Compensation Medicare Set-Asides (WCMSAs) on September-2023

Download Workers Compensation Medicare Set Aside WCMSA Administration Guidelines CMS March-2023

Other information

• Medcare Set Aside Arranagement- What is It? Why Is It Needed? Save With a Structured MSA
• Medicare Set Aside FAQ
• WCMSA Self Administration Tool-KI Version 1.4 July 3, 2023

Last updated January 15, 2024

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Rated Age and WCMSA: CMS Clarifies Guidance on Rated Ages

by John Darer® CLU ChFC MSSC CeFT RSP CLTC

CMS issued a clarification of its May 14, 2010 memorandum concerning rated age language to be included in Workers Compensation Medicare Set Aside Proposals (WCMSA). 

Rated Ages and Structured Settlement Cost | How It Works 2024 (4structures.com)

A revised rated age certification is now required which states:

“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"

CMS will not accept the Rated Age unless the specific language above is included in the WCMSA proposal.

CMS reiterated that acceptable proof of Rated Age is demonstrated through the inclusion of independent rated ages on the letterhead of an insurance carrier OR settlement broker.

Copy of CMS Memorandum on WCMSA Rated Ages  dated June 8, 2010  Download CMS Clarifies 5-14 Memo WCMSA Rated Age 6-8-2010

The latest WCMSA Reference Guide provides information on rated ages or life expectancy in Sections 10.3 and 15.

A Structured WCMSA can save money over a cash MSA. A rated age enhances the savings if the payments are life contingent.

 

Last updated May 4, 2024

Workers Comp MSAs: CMS Rated Age Requirements

by John Darer CLU ChFC MSSC RSP

The Center For Medicare and Medicaid Services (CMS) sure knows how to drop the Bomb, The Medicare Set aside (MSA) Rated Age.

From the latest of 13 CMS Memoranda... there is a new requirement for MSA submissions involving rated ages:

“Our organization certifies that all rated ages obtained on the claimant, at any time during that individual claimant’s lifetime, have been included as part of this submission to the Centers for Medicare & Medicaid Services.”  (underline added for emphasis)   

CMS Requires Median Rated Ages Be Used in WCMSA

As a bit of background, in its April 2005 ,CMS stated in Note 2 page 3 that where multiple rated ages are available, CMS would require the use of a median of the rated ages. The move by CMS was apparently designed to force workers comp settlement practioners to discontinue the practice of using the highest rated age to ensure the shortest available life expectancy and thus the lowest MSA funding amount (ultimately a "double discount")

CMS’ memorandum stated that  no variations or substitutions in wording will be acceptable.  If the exact language is not used, they will price out your WCMSA based upon chronological age, increasing the cost of the WCMSA.

It is important to distinguish between the use of rated age  to  "price out the WCMSA" in the CMS memo and the actual cost of the annuity if a structured MSA is used. The funder of the MSA will still be able to use the highest rated when it buys/funds the commercially available annuity for the structured MSA, it just wont get the "Double D".

But consider the burden of certifying this when the claimant may have received a rated age on an unrelated workers comp claim or a liability claim or lawsuit 10, 20, 30 years ago!  Would it be best practice to rely on a statement from the claimant for accuracy?  

Some say that CMS is looking to ban rated ages. Other speculation is that perhaps Patrick Hindert is far more powerful than anyone thought? In an April 24, 2010 effort to grow the structured settlement industry he posted about structured settlement public policy:

• "Why should structured settlement annuities cost less than lump sum alternatives to fund Medicare Set Aside Arrangements(MSAs)?"

and now  just 2 weeks later, Voila! 

What Are Rated Ages?

Copy of CMS Memorandum 13 dated May 14, 2010  Download 13 May-14-2010 Memo