Making sure your medical expenses are covered for life is likely one of your most important financial considerations
About 135.6 million workers were covered under state and federal workers’ compensation programs in the U.S. in 2015. The system paid nearly $62 billion in benefits during that year.
While most work-related injuries are relatively minor and workers can recover and return to work, that’s not always the case. Some injuries result in long-term disabilities that prevent you from returning to the job you had prior to the injury — or prevent you from working at all.
If that happens, you’re likely most concerned about how you’re going to manage financially... now that you have additional medical expenses and reduced or no income.
It’s important to know that there are 2 ways workers’ compensation benefits could be provided if you will require lifetime care for your work-related injury:
- A lump sum settlement is a single large payment that’s intended to cover your medical expenses for the remainder of your life. It’s paid once, and you manage the money your own way.
- Lifetime medical benefits are paid gradually for the remainder of your life, and the insurance company would cover all of your medical expenses that are related to the work injury.
This is a big decision, and it’s one that affects your finances for the rest of your life. You should consult a workers’ compensation lawyer before agreeing to either of these options.
In the meantime, we’ll take a look at the general distinctions between these options so that you can begin to consider what might work best for you. It’s important to realize that each state has its own workers’ compensation program and some of the laws, requirements, and regulations vary from state to state. Your workers’ compensation lawyer can advise you based on the specifics for your state.
What are lump sum settlements?
There are some distinct advantages to a lump sum settlement.
First, the money becomes yours. If you’re the type of person who manages money well and is careful about saving for the long-term, it might be helpful to have a finite amount that you can spend as you need it.
Second, you can obtain whatever medical treatment you think you need. There’s no requirement to prove that medical expenses are related to the work injury because the money is yours to spend. You would manage your own medical treatment.
But, there are disadvantages, too.
For starters, you can’t ask for more money if you suffer additional complications from your injury. If you require medical treatment beyond what’s anticipated at the time of the settlement, you will need to pay out of pocket or rely on your own medical insurance for additional costs.
The settlement offered by the insurance company might not cover all of your expenses. Even if all of the expenses are expected, if the money runs out, it runs out. There’s no second chance.
There are times when the insurance company will require that you resign from your job in order to take a lump sum settlement. For instance, if your claim is related to a back injury, they don’t want you to return to work, suffer another injury, and then file another claim.
What’s a structured settlement?
A structured settlement is an arrangement made between the payor (insurance company) and payee (injured worker) where the total amount that would be paid in a lump sum is paid instead as an annuity, which guarantees regular payments over a specified period of time.
You can choose a specific period of time for an annuity to be paid. For example, if you’re going to receive a lump sum payment of $100,000, you can choose an annuity to be paid over 20 years. You would receive the total of your settlement as $5,000 per year for 20 years.
You can also defer payment. For instance, if your condition or injury is stable but expected to deteriorate over time, you might decide that you’ll begin receiving your annual payments 10 years from now. You would still receive the same $100,000, but maybe you decide that you’d prefer $10,000 per year for 10 years beginning 10 years from today.
Your annuity payments can earn interest over time, which means you might end up receiving more money in a structured settlement than you would with a single lump sum.
A structured settlement payment is tax-free, but like a lump sum payment, you usually cannot alter the terms of the settlement once it has been agreed to. So, if your financial situation or medical condition changes, you can’t get extra payments sooner — you’re bound to the original agreement.
Lifetime medical benefits
In most states, workers’ compensation will provide lost wages and permanent partial disability benefits for a maximum of 500 weeks (about 9.5 years). If an authorized treating physician believes that ongoing medical treatment related to a work-related injury is reasonable and necessary, you could become eligible for lifetime medical benefits.
The main advantage to lifetime medical benefits is that you will always have coverage for whatever medical treatment you need that’s a result of the specific work injury. But, the burden of proof is on you, the injured worker, to show that the medical treatment you’re receiving is related to the specific injury that’s the subject of the claim. Most medical providers will require pre-approval of your treatment by your insurance company. Sometimes this can cause delays for your medical treatment.
Usually, lost wages are calculated into the overall amount of a lump sum settlement. With lifetime medical benefits, you’re covered for your medical expenses only, not any additional amount of time you’d need to take off from work in the future as a result of the injury. For example, if your injury requires you to have surgery 5 years from now, you would be covered for the surgery but not for the amount of time you need to be out of work to recover.
The role of a nurse case manager
If you choose lifetime medical benefits, you’ll probably be assigned a nurse case manager. This person works for the insurance company as a point of contact to assist you in receiving the care you need. They act as a liaison between you and the insurance adjuster and share information about your diagnoses, treatments, and ability to return to work.
While a nurse case manager can help schedule appointments and coordinate care, and the nurse case manager might have some level of medical expertise, keep in mind that they’re employed by the insurance company. Their job is to save the insurance company money, not to spend the insurance company’s money.
For instance, a nurse case manager might communicate with your doctor and convince them that your hospital stay could be shorter than the doctor recommended, or that perhaps you don’t really need a certain treatment, or that you would benefit from a less expensive form of treatment. That can influence what costs the insurance company will cover.
Different states have varying rules for the role of a nurse case manager. A workers’ compensation lawyer in your state can tell you what your rights and obligations are if you need a nurse case manager.
Should I choose a lump sum or lifetime medical benefits?
Only you, with the help of your lawyer, can make that decision.
For one thing, if the insurance company has made you a lump sum settlement offer, your lawyer can advise you on whether or not it’s enough to cover your needs. Second, lawyers work with financial professionals, actuaries, and medical experts all the time. There are formulas and techniques they use to determine what your medical costs will be based on your life expectancy, medical condition, and potential future income.
There are benefits and detriments to both systems, and the best choice for you comes down to your financial situation, your level of disability or medical need, and — sometimes — your personality. If you think you might be the type of person who’d be tempted to spend a lump sum on an extravagance rather than saving it for your medical expenses later, maybe it’s not the right choice for you. Or, maybe it is the right choice, but a structured settlement arrangement would help you manage your finances more wisely.
The first choice, though, is to select a lawyer who can help you make this important decision. The Enjuris law firm directory features a list of lawyers in each state who are experienced in workers’ compensation issues and claims, and who will work with you toward a firm financial future.
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