On October 31, 2017, Arizona Senate Bill (S.B.) 1332 became law allowing Arizona claims payers to reach “full and final” settlements of certain workers’ compensation claims. This new law provides Arizona insurers with an unprecedented opportunity (finally) to close out their workers' compensation claims.
On April 12, 2018, Governor, Doug Ducey signed S.B. 1100 into law which modifies the “full and final” statutory provisions put in place by S.B. 1332. Significantly, the amendments relax the bases for the Industrial Commission’s approval of settlements. Further, S.B. 1100 adds an entirely new section regarding the settlement of supportive medical maintenance benefits.
These important changes and updates are summarized as follows:
S.B. 1100 Changes - “full and final” settlements (accepted claims)
Arizona’s “full and final” settlement law, codified at Ariz, Rev. Stat. 23-941.01, allows parties to settle out accepted claims for compensation, benefits, penalties or interest. Settlements of denied claims, issues resulting in total and permanent disability, or claims unrelated to the claim for compensation, benefits, penalties, and interest are specifically excluded and not addressed in this provision.
In general, a signed settlement agreement, along with signed attestations, must be approved by the Industrial Commission. The required “attestations” must address several required items, such as projected future medical costs and a representation that the parties have taken “reasonable steps” to protect Medicare’s interests, “including establishing a Medicare savings account if necessary.”
S.B. 1100 now makes several changes to this process, including:
- Amends the basis for full and final settlement to reflect that it applies to accepted claims where the period for temporary disability is terminated by “a final notice of claim status, award of the commission, or stipulation of the interested parties.”
- Clarifies that the settlement agreement can be signed by an “authorized representative” of the carrier, special fund or self-insured employer. (The original text was silent as to whether a representative of these parties could in fact sign on their behalf).
Additional “attestations” are now required including:
- Future medical – disclosure of the amount of the settlement representing future medical, surgical and hospital benefits.
- Future indemnity – the carrier, special fund or self-insured employer has provided the claimant with information disclosing the total amount of future indemnity benefits, along with the claimant’s rated age (if applicable), source of the claimant’s life expectancy, present value of future indemnity benefits, discount rate used calculate present value, and the amount of the settlement representing the settlement of future indemnity benefits.
- The parties must attest that they have conducted a search for and taken reasonable steps to satisfy any “unpaid medical charges” (in addition to any identified medical liens).
- The settlement has not been achieved through coercion, duress, fraud, misrepresentation or undisclosed additional agreements.
Significantly, S.B. 1100 relaxes the bases for commission approval of a full and final settlement. Specifically, under S.B. 1332 the commission was required to determine whether the settlement was in the “best interests of the claimant” based on whether the claimant’s injuries had stabilized and the permanency of the claimant’s injuries. Further, for unrepresented claimants, the commission had to determine whether the settlement was “fair and reasonable.”
S.B. 1100 eliminates these provisions. Under S.B. 1100 the commission’s evaluation for approval is now limited to whether the specific requirements pertaining to the settlement agreement and attestations have been satisfied. Likewise, for unrepresented claimants, the commission’s focus is now on performing a “detailed inquiry” into the attestations provided by the claimant to make sure he/she understands the rights being settled and released and understands other matters related to the settlement.
New: supportive medical maintenance settlements
S.B.1100 adds this statutory provision, codified at Ariz. Rev. Stat. 23-941.03, which addresses final settlement and release of claims involving undisputed entitlement to supportive medical maintenance benefits.
Under this section, settlement is allowed after the period of temporary disability is terminated by a final notice of claim status or award of the commission. All medical conditions subject to settlement must be disclosed within the final settlement agreement. In addition, the carrier, special fund, or self-insured employer must submit a summary of all reasonably anticipated future supportive medical maintenance benefits (as well as the projected cost of these benefits), and this summary must be presented to the claimant for review and included in the final settlement agreement. The final settlement agreement is not valid and enforceable until approved by the commission.
Make S.B. 1100 work for you – settling your workers' compensation claims
Arizona’s “full and final” settlement law provides Arizona workers' compensation payers with excellent opportunities to close out workers' compensation claims. The legislature has opened the doors to a totally new day for Arizona workers' compensation claims – it is now time to take capitalize and get claims settled to reduce costs and exposure.
The first step is to identify claims that qualify for settlement. From there, make sure you properly document and include all the information required under S.B. 1100. You may find this checklist helpful in keeping it all straight.
From the Medicare angle, determine whether a workers’ compensation Medicare set-aside (WCMSA) is applicable. If so, chart a plan to reduce WCMSA allocation costs, including having a targeted strategy to reduce prescription costs. In addition, make sure you address any potential Medicare conditional payment recovery and/or Medicare Advantage lien claims and determine how these issues will be addressed and resolved. It is also important that applicable Section 111 issues are addressed. This includes terminating on-going responsibility (ORM) (as may be applicable and at the appropriate time) and making sure that settlements greater than $750 are reported under CMS’ total payment obligation to the claimant (TPOC) reporting trigger.
Arizona “Full and Final” Settlement – Resources
- One Pager – provides quick overview of S.B. 1100.
- Checklist – provides a listing of the required items you need as part of your settlement.
- Statutory Breakdown – provides a detailed “section by section” outline of the requirements.
- Five Steps to Reduce Your WCMSA Costs – this article outlines steps you can take to reduce WCMSA allocations.
- Casualty Solutions – How we can help! - learn how we can help you address your Medicare compliance obligations under S.B. 1100 – including WCMSAs, medical cost projections, cost mitigation strategies, conditional payments, Medicare Advantage plans, and Section 111 reporting.
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