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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). :

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

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

 

Liberty Life Offers Program to Ease Structured Settlement Rated Age Underwiting Back Log

In April 2009  Liberty Life Assurance Company of Boston introduced its Concierge Underwriting Program. This new program allows for underwriting on any case that you submit for a rated age, regardless of carrier.

To qualify for Concierge Underwriting, a broker must place $500,000 in non-Liberty Mutual Group premium with Liberty Life per quarter, and Liberty Life Assurance Company of Boston will underwrite any case that you submit for rated age throughout the following quarter. 

Liberty Life Assurance Company of Boston is a members of Liberty Mutual Group. Structured settlement annuities placed with Liberty Life Assurance Company of Boston are guaranteed by Liberty Mutual Insurance Company.

The Case of "The Dreaded Shrimp"

Timothy Richardson a former employee of the St. Louis branch of the Red Lobster restaurant chain, was left comatose in 2003 by the effects of a shellfish allergy hours after breading shrimp on the job.

DealFlow Media's report of the case on May 30, 2008 inaccurately states in its headline that the Richardson was "awarded a structured settlement". One cannot be awarded a structured settlement. It later correctly refers to the case resolution as a settlement.

Liberty Mutual, the responding insurer for Red Lobster, entered into a structured settlement in which annuities were purchased from Boston headquartered Liberty Life Assurance Company of Boston, its affiliate that underwrites structured settlement annuities.

Citing Richardson's attorney, Marty Perron, of the Perron Law Firm in St. Louis it was stated that "the terms of the settlement have "no guarantee." "If he dies, so does the settlement," Perron reportedly  said. On the other hand it was reported that the terms of the case were complicated, with several payable amounts besides the structured settlements  which were presumably paid in cash.

Perron's website refers to a $1.8 Million settlement on a worker's compensation case, presumably this case. Yet DealFlow Media characterizes the entire settlement as two annuities valued at $1.8 million. DealFlow Media felt it necessary to go into exhaustive detail about the injury itself rather than the significance of the planning issues which would add learning value to this tragic story for its readers. There is no mention about Medicare Set Aside Trust or Special Needs Trust or any other important settlement planning tools that would help tort victims, or other attorneys understand the  issues of the case.

There is no answer to the obvious question of why the case had to even settle in the first place, if the workers compensation carrier is on the hook for life and "the defense deemed the claim to be compensable".

• Was there a policy limit being bumped up against?
• What special circumstances were involved?
• How much of the annuity benefits the claimant?
• Did the attorney structure his fee?
• Did the attorney have a plaintiff structured settlement consultant counseling him and his client prior to agreeing to a life only deal?

Sometimes a life only annuity or temporary life annuity is used in a workers comp case to fund the future aspect of a Medicare Set Aside at the least amount acceptable to mitigate the strain on the claimant's resources. Other times when there is a high rated age (as suggested by DFM's report) a life only annuity with a deferred start date can be used as a financial backstop (at minimal cost) when there are large outgoing expenses and there is a risk that unpredictable spikes could drain a cash reserve. At that point it becomes pure insurance.

While this author does not consult Liberty Mutual on such matters, it's clear from a sense of what is fair reporting, that all DFM has done is attempt to frame Liberty Mutual in a bad light by highlighting the affiliate annuity purchase and the "no guarantee" annuity.