Arizona SB 1100 Impacts “Full and Final Settlements” of Accepted Claims
Last month, Arizona Governor, Doug Ducey signed Senate Bill 1100 (SB 1100), which is a modification to the legislation allowing for full and final settlements. You may recall our initial blog on the ability to finally fully settle and close out a workers’ compensation claim in Arizona, under Senate Bill 1332 (SB 1332), as well as our most recent blog discussing the introduction of SB 1100. In January, SB 1100 was introduced to modify the legislation in part, and broaden the ability to settle a claim, whether the claim was accepted or denied. However, after several amendments, SB 1100 was once again reverted to addressing only accepted claims, such that denied workers’ compensation claims are not eligible for full and final settlement.
The additional significant modifications to the legislation include the following:
- Removal of the previously required best interests standard ;
- If an employee is represented by counsel, the Administrative Law Judge (ALJ) may approve the full settlement if the required attestations have been provided. Of note, this approval can be obtained without a hearing;
- Removal of the requirement that the employee be represented by counsel. Employees must attest to their understanding of the full settlement without coercion, duress, fraud, misrepresentation, or additional undisclosed agreements;
- Note, that if unrepresented, the employee will still appear before an ALJ, who will conduct a hearing and perform a detailed inquiry into the settlement as proposed, including whether the employee understands the specific rights being settled. This inquiry will include addressing the computation, and methodology provided by the carrier, special fund or self-insured employer, and the employee’s responsibility to protect the interests of other payors and ensure the payment of treatment costs.
- The employee must be provided with a disclosure of the amount of the settlement that represents the settlement of future medical, surgical or hospital benefits;
- The employee must also receive a disclosure stating the total amount of future indemnity benefits, the employee’s rated age, if applicable, the employee’s life expectancy, the source of the employee’s life expectancy, present value of future indemnity benefits, the discount rate used to calculate present value, and the amount of the settlement that represents future indemnity benefits;
- Removal of the word lump sum from the previous text of the legislation; and
- The requirement that the carrier, special fund or self-insured employer shall notify the attending physician of the approval of the final settlement.
Most significantly, the modifications as provided by SB 1100 do not change the requirement that a carrier, special fund, or self-insured employer must provide an employee with the amount of the settlement covering the future medical costs. Nor does SB 1100 change the requirement that Medicare, Medicaid, the Indian Health service, and the United States department of Veterans Affairs’ interests all must be taken into consideration.
In consideration of this modified and enacted legislation, we continue to offer the following best practices, if settling a claim in Arizona:
- Evaluate claimant’s current medical status before contemplating settlement. An employee’s injuries should be stabilized, which generally means after an employee has reached maximum medical improvement;
- Obtain a reasonable and defensible Medicare Set-Aside allocation, supported by solid medical and legal evidence. The clear and plain language in SB 1100 requires a thorough and accurate projection of a claimant’s future Medicare covered medical needs, as well as non-Medicare covered expenses. These future medical needs should also be considered in light of the legal position of the case;
- Conduct a conditional payment inquiry to ensure that all conditional payments and liens have been resolved and satisfied prior to settlement. It is important to note that conditional payment demands can happen post settlement; so this is certainly a step parties do not want to miss. This includes consideration of whether a claimant is enrolled in a Medicare Advantage Plan and how best to satisfy any obligations to those plans; and
- Consider obtaining a structured settlement quote, prior to settlement to determine any additional cost savings. Structuring a settlement can result in faster settlements and greater savings, while preserving a Claimant’s assets. In fact, with removal of the requirement of a “lump sum” for payment of the settlement, a structured settlement can be utilized to structure either the Medicare Set-Aside allocation or the indemnity portion of the settlement.
Overall, the continued broadening of this legislation is still an ample opportunity to fully resolve accepted claims. Our suite of Medicare Secondary Payer solutions can assist in the resolution of claims, by reducing and eliminating significant future costs. Please feel free to reach out to our team at firstname.lastname@example.org, if we can be of assistance.
 A “full and final settlement,” is defined as “a settlement in which the injured worker waives any future entitlement to benefits on the claim and any future right to change the claim.” SB 1100.
 This best interest standard was based upon whether the employee’s injuries were stabilized and the permanency of the employee’s injuries.