Historically, workers’ compensation claims in Arizona have been subject to a number of limitations. If additional medical treatment was needed, a claimant could reopen a claim at any time, despite the finality and resolution of the claim. 

Jean S. Goldstein

As a result, settlement of workers’ compensation claims in Arizona have been far less common because these claims could never fully close. However, as of Oct. 31, 2017, pursuant to the recently enacted Senate Bill 1332, permanent closure of all medical benefits will be possible.

SB 1332 unambiguously introduced the meaning of “full and final settlement” as “a settlement in which the injured employee … waives any future entitlement to benefits on the claim and any future right to change the claim.” This means that as of Oct. 31, parties to an Arizona claim can utilize a settlement agreement to close all future medical indefinitely.

What should an Arizona full and final settlement agreement look like?

The Industrial Commission of Arizona (ICA) must still approve all full and final settlement agreements, and there are requirements for these agreements. Specifically, the agreement:

• Must be in writing.
• Must be signed by the carrier, special fund or self%u2011insured employer and the employee or the employee’s authorized representative.
• Must acknowledge that the employee had the opportunity to seek legal advice and be represented by counsel.
• Include a description of the employee’s medical conditions that have been identified and contemplated at the time of the settlement agreement.

Of significant note, SB 1332 also requires that the agreement outline all anticipated future medical costs and treatment. This allocation must be accurate and be accompanied by an explanation of how the costs were determined.

The agreement and allocation must also reflect that reasonable steps have been taken to consider the interests of Medicare, Medicaid, the Indian Health Service and the United States Department of Veteran Affairs. Therefore, for future medical to be fully settled, the claim must be valued appropriately to ensure that Medicare, Medicaid, Indian Health Service and the V.A. are all secondary payers to a resolved claim.

SB 1332 also mandates that parties must also take all reasonable steps to identify and satisfy any medical liens, such that any conditional payments should be resolved at the time of settlement.

To ratify such an agreement, the ICA will consider whether the settlement is in the best interests of the employee based upon whether his injuries are stabilized, and
the permanency of the injuries.

Best-practice tips

For Arizona cases settling after Oct. 31, we would offer the following best-practice tips:

• Evaluate claimant’s current medical status before contemplating settlement. Per SB 1332, 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. Each agreement must accurately portray a claimant’s future medical needs, in consideration of the legal position of the case.
• Conduct a conditional payment inquiry to ensure that all conditional payments 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.
• Consider obtaining a structured settlement quote prior to settlement to determine any additional cost savings. Often, structuring a settlement can result in faster settlements and greater savings, while preserving a claimant’s assets.

Jean S. Goldstein is a CMS compliance manager and staff attorney for Medval. This blog post is republished with permission.