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< Previous8 CLM MAGAZINE SEPTEMBER / OCTOBER 2024 I n November 2023, the Centers for Medicare & Medicaid Services (CMS) hosted a webinar announcing the expansion of Section 111 Non-Group Health Plan (NGHP) (workers’ compensation, general liability, and no-fault insurance payers/ plans) Total Payment Obligation to Claimant (TPOC) reporting to include Workers’ Compensation Medicare Set-Aside (WCMSA) information. At the time, CMS verbally indicated that this was simply a potential expansion. However, it is now confirmed that this new reporting requirement will take effect on April 4, 2025. CMS has confirmed that WCMSA information should be reported on all workers’ compensation settlements involving Medicare beneficiaries, regardless of whether the Medicare Set-Aside was voluntarily submitted and reviewed by CMS or was a non-submit/ evidence-based Medicare Set-Aside. Further, CMS noted during the webinar that submission of WCMSAs to CMS remains a voluntary process, and the upcoming WCMSA reporting requirement does not represent a policy shift with respect to the validity of non-submit/ evidence-based Medicare Set-Asides. This announcement came as a surprise, and many industry stakeholders did not understand why CMS suddenly wished to require the reporting of MSA information for all workers’ compensation claims involving Medicare beneficiaries. At the time of the November webinar, Diving Into CMS’ Upcoming Requirements A Look at the New Medicare Reporting Rules for WCMSAs By Heather Sanderson and Paul Gladden WORKERS’ COMPENSATION >>> Heather Sanderson, Esq., is chief executive officer of Sanderson Firm PLLC. heather@ sandersoncomp.com Paul Gladden is director, workers’ compensation claims at Pie Insurance. paul.gladden@ pieinsurance.comTHECLM.ORG/MAGAZINE CLM MAGAZINE 9 CMS representatives commented that it is not always provided with finalized settlement documents, post-settlement, confirming WCMSA information, even when the WCMSA is approved by CMS. CMS’ intent for expanding reporting is to ensure that all reported WCMSA information is as accurate as possible for coordination of benefit purposes. As such, the upcoming WCMSA reporting requirement will provide CMS with another source to reference basic WCMSA information and coordinate benefits/pay secondary where an MSA is available to pay. CMS has never indicated that this upcoming requirement is in response to the use of non-submit, evidenced-based MSAs. CMS has stated that the reported information will be utilized by posting a WCMSA record to the Common Working File (CWF) preventing payment of medical services related to injuries described by the diagnosis codes. CMS anticipates sending notification of the reported WCMSA information to the Medicare beneficiary indicating the process for appropriate attestation and exhaustion. CMS currently does this for WCMSAs that go through the voluntary submission process when they are provided with final settlement documents, however, beneficiaries may be surprised by such correspondence, and primary payers/claims adjusters may receive telephone calls from beneficiaries with questions regarding the significance of the reported data. The seven new data fields to be reported are outlined in the Section 111 NGHP User Guide version 7.5, Appendix A. The new fields require the reporting of the MSA amount, the method of payout (lump sum vs. annuity), and the amount of time the MSA is anticipated to cover. Zero Dollar Medicare Set-Asides must be reported by leaving the lump sum or annuity payout structure (field 39) blank. Additional fields include the tax ID for professional administrators (if used) and the Case Control Number CMS assigns to an MSA. These new requirements may strain the current capabilities of claim systems when it comes to the collection and exporting of data. There may also be confusion from claim personnel concerning how to correctly populate mandatory fields. It is recommended that during the testing period, system reporting capabilities are checked, reporting workflows are revised, and claim personnel training on the new data fields is prioritized. When reporting WCMSA information via TPOC, entering an incorrect value for certain fields (e.g., MSA Amount, MSA Period, Lump Sum vs. Annuity Indicator, Annuity Anniversary Deposit Date, and Case Control Number) will result in a hard error causing CMS to reject the TPOC record. In the event such an error occurs and the NGHP RRE fails to timely correct and re-report the TPOC record, the NGHP RRE will be exposed to civil money penalties due to late reporting. Errors pertaining to the new WCMSA information submitted will be returned as new soft or hard edits on the Section 111 NGHP Claim Response File according to current processing standards. CMS noted that, although the WCMSA reporting implementation date is currently April 4, 2025, CMS will not assess any Civil Money Penalties (CMPs) associated with improper WCMSA reporting for two reporting periods (or six months) after the April 4 implementation date. This suspension period derives from the Final Rule’s temporary deferment of CMPs where RREs are required to make significant changes to their systems to prepare data for Section 111 Medicare reporting purposes. CMS indicated that the suspension of CMPs could arise again as CMS continues to update its policies and procedures surrounding WCMSA reporting. More specifically, CMPs would be suspended for two reporting periods so long as the CMS update caused the non-compliance in reporting. CMS addressed how different types of errors in reporting could impact the imposition of CMPs. For example, when a “hard error” occurs, CMPs could apply if the hard error remains uncorrected because while a report was made, the information would be rejected by CMS. However, on the other hand, a “soft error” would likely not result in CMPs because the information would still be accepted and thus reported timely. Given that Section 111 reporting only applies to Medicare beneficiaries, the reporting of WCMSA information will not apply to individuals who meet “reasonable expectation” status as defined under the WCMSA Reference Guide. Additionally, there are no changes to reporting of settlements (TPOCs) for no-fault and liability settlements. The addition of the new MSA data reporting requirements does not change CMS’s stance that the submission of a WCMSA is voluntary. We believe that Non-submit MSA’s will continue to be a valuable tool for claim administrators, and that the new reporting requirements will allow for the correct reporting of all financial considerations made in the settlement of a claim. Due to the significant policy changes presented by these new reporting requirements we strongly encourage RREs to take advantage of the testing period before these requirements take effect April 4, 2025. K The new fields require the reporting of the MSA amount, the method of payout (lump sum vs. annuity), and the amount of time the MSA is anticipated to cover.10 CLM MAGAZINE SEPTEMBER / OCTOBER 2024 A cross the U.S., organizations of all types, including houses of worship, face rising costs and greater risks. There are many reasons behind these trends, and in this article we look at some of the key factors that should shape organizations’ risk prevention strategies. Here are some of the most prevalent trends as we head toward 2025: Weather-related disasters are factoring into expected probabilities for most models. Various geographic areas have seen greater-than-normal weather disasters, and this unpredictability poses both modeling challenges for insurers and greater risk for insureds. The best way organizations can adapt is by taking extra steps to safeguard their buildings and people from the weather. Those steps include: • Make sure the building is in good repair. Perform regular inspections and fix any items noted. Protect property from windstorms by adding roof tie-downs, storm shutters, and a wind-rated garage door. Keep any A Riskier Landscape for Houses of Worship Latest Trends and How to Mitigate Them By Eric Spacek RISK >>> Eric Spacek is assistant vice president – risk control at Church Mutual Insurance Company, S.ITHECLM.ORG/MAGAZINE CLM MAGAZINE 11 items that are stored outdoors secure so they do not become airborne and injure people or damage property. Hire a professional to inspect the roof regularly and ensure it can handle high winds. • Review policies annually with an insurance professional. Building replacement costs have risen more than 55% since 2019, so even if a policy is relatively new the values may already be out of date, putting organizations at risk of being underinsured when a severe weather event hits. • Create an emergency management plan and share it with local law enforcement. This plan should provide a blueprint for how organizations will protect both their buildings and their people. Social inflation and Nuclear Verdicts are forcing insurance companies to shift the burden of a rising number of claims to their customers. Plaintiffs are seeking larger amounts for their injuries, which ultimately results in higher insurance premiums. Because this is more of a societal than individual problem, organizations cannot plan for this risk directly. They can, however, focus on avoiding the injuries to begin with through: • Slip, trip, and fall prevention. • Security and crime prevention. • Cybersecurity. • Illness and injury prevention. The increased cost of building supplies means organizations should budget more for building maintenance. Escalating building supply prices mean the costs to replace “big ticket” items such as the roof, HVAC systems, and boilers are often higher than organizations might expect. They should budget accordingly. In addition, it costs much more to replace a building than it did even 10 years ago. This rising cost of building supplies—and, as a result, insurance—can be problematic for organizations that do not fully prepare for it. They need to account for increased costs by bringing in more money. There can be significant consequences for under- insuring a property. Aging infrastructure may lead to insurability problems for houses of worship. It is important for houses of worship to keep a close eye on whether their building has fallen into disrepair. While many people feel age adds to the charm of a church, synagogue, or mosque, it can also lead to costly problems. To mitigate this risk, houses of worship may need to upgrade certain vital aspects of their facility to keep their insurance policy. They should also prepare their building for severe weather, which could have a devastating effect on their bottom line if it causes major damage to their infrastructure. Increased online offerings could raise cybersecurity risks. The COVID-19 pandemic showed people across the world that it was possible to replace many in-person interactions with virtual alternatives. Today, many organizations are finding that people want to continue those online interactions. That poses a challenge for cybersecurity, which could become compromised with greater use of virtual offerings. The best ways for organizations to shore up their cybersecurity are to: • Create a written internet use and access policy, providing training on the policy for all staff and volunteers. • Provide cybersecurity training to employees upon hire and periodically throughout the year. This training should include how to identify phishing, spear phishing, ransomware, and other malicious emails. • Stress the need for creating strong passwords or pass phrases by using a combination of upper- and lowercase letters, numbers, symbols, and special characters. • Use multi-factor authentication in addition to passwords or pass phrases for an added layer of protection for internal systems and data. • Keep software and apps on all internet-connected systems up to date and delete unused apps to reduce the risk of infection from malware or ransomware. • Regularly back up information that is critical to the organization’s operation. • Require permission to access the organization’s Wi-Fi network. • Complete criminal background checks on all individuals who have access to the organization’s systems and devices. • Allow system and device access only to those who have been approved and use authority levels to limit access to sensitive or critical data. • Prepare for an attack by reviewing and evaluating the vulnerability of all computer-related systems within the organization, and review insurance coverage. Risk prevention is the backbone of the insurance industry and is also the best way for organizations to take control of their own fate. Without a strong risk prevention program, an organization may face greater losses, inadequate coverage, and higher premiums and deductibles. It is worth the effort and investment. K It costs much more to replace a building than it did even 10 years ago. This rising cost of building supplies—and, as a result, insurance— can be problematic for organizations that don’t fully prepare for it.12 CLM MAGAZINE SEPTEMBER / OCTOBER 2024 I n the wake of flood, fire, mold, or natural disaster, experienced restoration and recovery professionals understand that reducing risk and protecting policyholder belongings are mutually compatible goals. A speedy, efficient, and effective restoration process minimizes losses, reduces uncertainty, protects both policyholders and insurers from significantly high severity, and saves all parties time and frustration in the process. In that context, it is critical for insurance professionals to have a strong understanding of accepted restoration best practices. By familiarizing themselves with common pitfalls, and by understanding the priorities in the wake of an incident, they can make smarter and more informed decisions about the restoration professionals they engage. In the process, they can not only better serve their policyholders, but they can also reduce their exposure. What follows are the most important priorities, practices, and points of emphasis that should be addressed in the wake of a damaging incident that requires restoration and recovery services: MOVE QUICKLY Speed matters. Quick response times can help minimize additional damage, increase restoration success, and keep severity down. The first 24 hours are Risk and Restoration Minimizing Liability, Reducing Expense, and Streamlining the Restoration and Recovery Process By Wayne M. Wudyka Wayne M. Wudyka is CEO of the Certified Restoration Drycleaning Network (CRDN). wayne.wudyka@crdn.com PROPERTY >>> © PHOTO BY SEAN RAYFORD/GETTY IMAGESTwo CLM Lifetime Achievement Award Honorees Join Suite 200 Solutions Vic is the former AVP of Risk Management for Marriott Vacations Worldwide and Larry is the former VP of Casualty Claims for Tokio Marine. Together they bring more than 80 years of combined expertise in the claims and litigation management arenas. Join us in congratulating them as they make their expert advisory services available to our great CLM community. FOR CARRIERS AND SELF-INSUREDS • Quality audits • TPA oversight • Cost-containment programs • Large case analysis • Coverage training FOR DEFENSE FIRMS • Quality and legal audits • Understanding processes and procedures of Insurance Carriers • Client solicitation & retention training • Expert witness services Ask Vic and Larry how can they can help your organization: vic.marmo@suite200solutions.com larry.beemer@suite200solutions.com “I have worked with Vic and Larry for many years, and they represent the best in the industry in terms of knowledge, litigation skill and Risk Management” — Dan Berman, Executive Chairman & Co-founder, Wood Henning, Smith and Berman www.suite200solutions.com VIC MARMOLARRY BEEMER14 CLM MAGAZINE SEPTEMBER / OCTOBER 2024 particularly critical, and restoration professionals should be on-site as soon as possible to begin assessing the state of damage. While a speedy response can increase restoration efficacy for almost all home goods, it is especially critical for sensitive or complex home contents like textiles, electronics, and art. Quick, decisive action can interrupt the corrosive nature of many types of damage that leads to losses. DON’T ASSUME Adjusters often make the (potentially costly) mistake of assuming something is non-restorable. Don’t assume. Contents restoration is almost always significantly more cost-effective than replacement, offering comparative severity reduction of around 70-80%. Instead of assuming a homeowner’s items are unrecoverable, allow trained and trusted restoration experts to determine the best course of action for each item. Restoration professionals can conduct a physical assessment of contents like textiles, electronics, and window treatments that can distinguish between damage from the event and other pre-existing wear and tear from UV exposure, humidity, temperature changes, and other age- related latent defects. The result is the opportunity to work collaboratively with the policyholder to make informed value decisions, leading to smarter and more efficient allocation of funds. The resulting reduction in severity can free up dollars that can be better utilized to replace any items that cannot be restored. TEST WELL The goal of any restoration and recovery process is to get everything back to a pre-loss condition as efficiently as possible, which is why speedy and comprehensive electronic device testing and test cleaning of contents is so important. Documented, professional electronics testing is the first step in a restoration response that will achieve the goal of returning any damaged goods or property to a 100% pre-loss condition. From TVs to treadmills to toasters, pre- and post-restoration testing can determine if appliances and electronics are working with a level of detail and rigor (e.g. the temperature of the icemaker) that can indemnify an insurer against future claims. INVENTORY AND DOCUMENT If a job does not start right, it will not end right, which is why optimizing restoration and minimizing exposure and liability starts with properly documenting all items in the house in their/its current state. Physical inventory and photo documentation is key. Be sure to engage policyholders in the process and keep them informed. For example, if a homeowner has a box of donation clothes or a closet full of broken appliances, they can communicate to the restoration company what does and does not need to be tested or restored. Contents that have been exposed to hydrocarbons or suffered water damage will likely need to be removed from the environment to be restored—and only returned once the structure itself has been cleaned and restored. But that process cannot proceed until inventory taking and documentation has concluded. AVOID FURTHER DAMAGE The importance of insurance adjusters and on-site personnel being vigilant when visiting restoration sites to minimize additional damage and accurately evaluate impact cannot be overstated. It is not just about taking action to prevent further damage, but also sometimes it is about knowing what not to do. For example, introducing heat to dry textiles before being cleaned after a water loss can set in stains. Trust the restoration experts to do their work, ideally partnering with vendors who can provide the kind of comprehensive services that further reduce complexity and minimize risk. The right restoration partner will have a production facility for processing soft and hard contents and cleaning and testing electronics; is adept at conducting physical inventory, removal and storage; and will have sufficient in- house restoration technicians available so that no subcontracting is required. Reducing the number of vendors streamlines the restoration, storage, and recovery process and helps achieve the foundational goals of reducing risk, severity, confusion, and liability. K Adjusters often make the (potentially costly) mistake of assuming something is non- restorable. Don’t assume! PROPERTY >>>LARGE LOSS CONFERENCE October 23-25 | JW Marriott Tampa, FL www.plrb.org Engage in Interactive Workshops Dive into a variety of large loss scenarios led by industry experts. Expand Your Network Connect with top-tier adjusters and service providers across hundreds of disciplines and specialties. Participate and Learn Join industry leaders to share insights and experiences in adjustment and resolution strategies. Don’t miss this opportunity to engage with the best in the business. Join PLRB for a premier gathering of the industry’s top large loss handlers, service providers, and experts from across the nation. Register Today!16 CLM MAGAZINE SEPTEMBER / OCTOBER 2024 “Intelligence is the ability to adapt to change.”- Stephen Hawking C hange has come. Exorbitant jury verdicts are increasing in both severity and frequency. The defense industry needs to adapt to this environment and change the way we handle claims from inception through trial. Recently, in venues once thought to be defense leaning, we are seeing juries award Nuclear and even thermonuclear verdicts. As an example, juries in suburban Westchester County, New York awarded plaintiffs verdicts of $120 million and $23 million in malpractice actions within a six-month period. These grossly excessive verdicts have far-reaching adverse consequences throughout society. They contribute to inflation, raising the cost of everyday items such as health care, food, and housing. Entities can become uninsurable, driving them out of business, decreasing economic output, and inhibiting job growth. There are several contributing factors to this trend, including social inflation, corporate mistrust, and erosion of tort reform. The public is also desensitized to large-dollar figures; in a Avoiding The Monster How to Avoid the Thermonuclear Verdict Flattening Your Defense By Gary Leonard and Dylan Braverman LITIGATION MANAGEMENT >>> Gary Leonard, MA, AIC, CCP is executive vice president of Gallagher Bassett Specialty. gary_leonard@gbtpa.com Dylan Braverman is a partner at Barker, Patterson, Nichols LLP. d.braverman@bpn.lawTHECLM.ORG/MAGAZINE CLM MAGAZINE 17 world where a professional athlete can secure a $700 million contract, juries no longer see a $100 million award as a shock to the senses. Nuclear Verdicts are a daily feature of social media and trade headlines. Potential jurors are besieged with dizzyingly large verdicts everywhere they turn. Facebook, YouTube, Podcasts, and TikTok all alert potential jurors of unsustainably high verdicts. The Netflix series, “Take Care of Maya,” was watched almost 14 million times prior to a verdict of $261 million against Johns Hopkins All Children’s Hospital. Millions of jurors around the country learned of the salacious details regarding this verdict in a blatantly partisan manner; only a fraction later learned that the damages were reduced by almost $50 million. The inevitable impression is that verdicts like this should be normalized, and the jurors who “exact justice” should be celebrated as social justice heroes. The plaintiffs’ bar has taken advantage. They are disciplined and organized, pooling resources to win legislative battles and sharing courtroom tactics, like the “reptile theory,” that inflame jurors. While the concern has risen in our industry, there is a dearth of genuine strategies to reduce the likelihood of being nuked. COUNTERING THE TRENDS It is time to adapt and offer genuine change to our defense strategy. The defense industry must unite and work collaboratively to balance the scales of justice. The New York defense bar provided a blueprint for a path forward in the management of COVID-19 litigation. It soon became plainly evident that there would be a landslide of litigation in the wake of the pandemic. The insurance carriers, third-party administrators, hospital systems, trade groups, and the defense bar united to share ideas and legal memorandums, and mount a coordinated effort to enforce the state’s immunity provisions. The defense realized that a win for a “competitor firm or insurer” was tantamount to a win for all. As a result, good law was made and COVID-19 claims have been met with positive appellate law and trial court dismissals. The same level of coordination would go far in pushing back against social inflation and Nuclear Verdicts. Just as crucially, the defense must quickly identify fact patterns with the potential to go Nuclear. The sluggishness with which these claims are identified is a large driver in median Nuclear Verdicts increasing two-fold year-over-year. Earlier identification and workup is often the key to reaching a reasonable settlement years before the case becomes radioactive. Much like a nuclear bomb requires enriched uranium, a Nuclear Verdict needs an inflamed jury. They become angered when defense witnesses are untruthful, uncaring, or refuse to accept responsibility for their own actions, blaming others for the poor outcome. When you mix in social inequities and a highly sympathetic plaintiff, you have a recipe for a Nuclear Verdict. Jurors will ignore the logic of the defense and act upon their anger. We must conduct early investigation to determine which cases have these factors. Knowledge is power, and the defense often has access to the lion’s share of information required to analyze departure. A methodical investigation replete with deadlines to be revisited every 30-days until complete is key. Most of the investigation should be done within six months of the claim being reported, allowing a commanding understanding of the exposure and damages. At this point, the question of early settlement vs. defend can be assessed. Claims expenses will be known and factored into the decision. Now, the defense will have an informational advantage. The next step is to make an offer. This can stun the plaintiff into reasonableness and reduce the chances of the plaintiff focusing on what is normally an aspirational initial demand. The days of waiting for a demand are over. Making a real offer can wrestle away control of the narrative. Do not make a lowball offer, as this may inflame the plaintiff’s attorney and entrench his client’s position. The more realistic the initial offer, the higher the chance of disarming the potential bomb later as positions harden. If the plaintiff beats you to the table and the offer is as expected, “outrageous,” do not take it personally and remember who carries the checkbook. Again, do not respond in kind: Put a real offer on the table with the appropriate messaging to the plaintiffs. In negotiating the case, plaintiff’s counsel should be reminded of the fact that the defense prevails 80% at trial. Moreover, in the wake of COVID-19, the path to a verdict at trial may take the better part of a decade. A lot can happen in that time, making their case worth dramatically less. We must be realistic: These strategies will not eradicate all Nuclear Verdicts to come. However, these steps can serve to reduce the awards and make them less frequent. K Nuclear Verdicts are a daily feature of social media and trade headlines. Potential jurors are besieged with dizzyingly large verdicts everywhere they turn.Next >