Maryland House Bill 114 – A Great Reason to Annuitize or Professionally Administer MSAs in Maryland
On April 14, 2012, Maryland Governor Martin O’Malley signed into law a bill that amends Sections 9-806 and 9-1007 of the Maryland Labor & Employment code governing mandatory assessments on certain workers’ compensation awards and settlements on behalf of the state’s Subsequent Injury (SIF) and Uninsured Employers’ Funds (UIF). SIF receives 6.5% and UEF another 1% of any award for PT or death, including awards for disfigurement and mutilation, or settlements approved by the Commission. In 2011, three cases were appealed on the issue of these assessments on Medicare Set-asides (MSAs) with two different results. The one case were the insurer was not required to pay the assessments turned on the fact that the claimant never received the funds. The MSA in that case was established as professionally administered with a reversion upon death back to the carrier. The new legislative exemption draws from that case.
H.B. 114 creates an exemption for a “formal set-aside allocation” [for definition, see COMAR 12.09.01.01(B)(3)] is the medical benefit is in excess of $50,000 and paid out with an annuity or in any amount that is professionally administered by a 3rd party vendor with no reversion to the claimant’s estate.
While obviously a savings to insurers, this is a greater victory for injured workers. Self-administration as established by CMS is an incredible burden on the injured worker with serious risk of further loss of medical benefits if done improperly. Claimant’s are expected to maintain MSAs in interest bearing accounts separate from their personal finances and used only for medical treatment related to the settlement and otherwise a service that Medicare would have otherwise covered, paid at the rate used to calculate the MSA even if the state WC fee schedule that a private pay patient will have no statutory support for obtaining from a physician any longer, a full accounting maintained so that it can be demonstrated to CMS that the allocation was fully exhausted to possibly resume benefits some day if needed and to annually attest to CMS each year that this was all done. Furthermore, lump sum funding of MSAs that are self-administers provides an incredible temptation to an individual who’s inability to work will clearly have already caused a financial strain in his life yet is reported by CMS to occur in over 90% of the MSAs it has approved over the last decade. This legislation will encourage more insurers to do the right thing and if not pay for the professional administration at the time of settlement to ensure that all parties to settlements, including Medicare, are better protected, to at least utilize annuity funding to prevent one improper act from rendering an injured worker without access to necessary lifetime medical care.
The bill can be accessed here.