In last week’s Leaders Speak article, WorkersCompWire discussed that having Medicare Set Aside (MSA) funds from a settlement professionally administered is the safest choice and the option that The Centers for Medicare and Medicaid Services (CMS) “highly recommends” in its WCMSA Reference Guide. But not all administrators are created equal, and you may be wondering how do I pick the best one?
Recent reports, such as the troubling news from Clearwater, where a man allegedly misappropriated over $100 million in healthcare trust funds, including some MSA funds, underscore the critical importance of choosing a secure professional administration partner for your MSA. This case highlights the devastating consequences of inadequate oversight and transparency, emphasizing the need for a rigorous evaluation of potential partners.
“Professional administration is a must for MSAs. It protects everyone involved, especially the injured worker, and it helps settle the case,” says former Judge of Compensation Claims and founding member of the Mediation Group, Howard Scheiner, “When it comes to choosing a partner, I see groups gravitate toward an administrator owned by a bank because it adds an extra level of security that payers, attorneys and injured workers value.”
For attorneys representing injured individuals or payers pursuing settlements, checking the box on getting a professional administrator involved is a good initial step, but the stakes are high to make sure you choose the right partner. The choice of a professional administrator can mean the difference between financial security and catastrophic loss.
Here are key factors to consider when selecting your partner to ensure the funds are protected and managed responsibly.
Regulation and Oversight
The most reliable professional administration partners operate under stringent independent and third party audit and regulatory oversight. Regular, independent audits of financials, service levels, and risk controls are essential to verify adherence to these standards. Organizations regulated by federal bodies such as the Office of the Comptroller of the Currency (OCC) and compliant with laws like the Sarbanes-Oxley Act (SOX) and the Gramm-Leach-Bliley Act (GLBA) ensure an extra layer of security. A professional administration partner that is part of a publicly traded or bank-owned structure often provides higher levels of accountability and transparency, as they are subject to rigorous regulatory scrutiny and annual audits. Simply put, if there’s not an external regulator or auditor overseeing the administrator’s activities, no external third party is validating that they are keeping track of your funds appropriately.
“The importance of protecting healthcare data and funds could not be higher in today’s world,” notes Robert Biltz, Vice President of Claims at AmTrust Financial Services. “When it comes to settling a file, we only work with partners that meet our stringent security requirements while delivering great value.”
Transparency and Accessibility
One of the most critical elements of trust is transparency. Can the administrator provide real-time access to your bank account balance and activity? Are the financial statements clear, detailed, and readily available?
High-quality administrators ensure every member has a separate, FDIC-insured account, visible 24/7 through secure online portals and mobile apps. According to CMS guidelines, funds should never be pooled or invested, guaranteeing full visibility and security for account holders.
Administrators who pool funds, invest them in risky instruments, or use multiple bank or trust intermediaries without clearly defined structures, are running risks that should be clearly disclosed and understood by the accountholder. Such practices not only obscure the management of your funds but may also expose them to significant risks of losing money.
“Banking is a highly regulated industry. At Webster Bank, we have hundreds of colleagues that focus entirely on ensuring funds are safe and systems and processes are protected. Having a professional administration organization as part of the bank means they comply with all the regulatory audits and standards. This is a high bar to hit and I’m proud we’re operating at such a secure level. It is a much higher level of security and scrutiny than a company that operates as simply a client of a bank and keeps its own records and processes which may not be subject to any audit or oversight,” notes Senior Managing Director at Webster Bank and Chief Operating Officer at Ametros, Gal Zhovnirovsky.
Ownership and Longevity
Evaluate the ownership structure and succession planning of any professional administration partner. Privately held companies or smaller firms without a clear succession plan can pose risks, as evidenced by past instances of fraud and insolvency. On the other hand, with publicly traded and bank-owned entities, quarterly financials are released to show the health of the administrator. In addition, these organizations are required to maintain succession plans to ensure no loss of service. The typical MSA settlement is meant to last over 20 years from the time of settlement to death. Make sure the administrator you choose has a robust staff, financial profile and plan to endure decades of providing stable, transparent, and accountable service.
“I walk my client through all the life-long responsibilities of managing the MSA and we reach agreement that it will be professionally administered. Having a secure professional administrator by their side gives us both peace of mind that they are in good hands for the long run,” comments Paolo Longo, Partner at Bichler & Longo, PLLC.
IT Security and Fraud Prevention
The digital age brings both convenience and risk. Robust cybersecurity measures are essential to protect sensitive data and financial assets. Ensure your professional administrator adheres to SOC II standards and has robust IT security protocols in place.
Organizations with bank-level security measures and a commitment to compliance with IT security standards provide a higher degree of protection against cyber threats and fraud.
Questions to Ask Potential Partners
Before committing to a professional administration partner, Alex Dell, a claimant’s attorney in New York and Florida, and founding attorney at the Law Firm of Alex C. Dell, PLLC, shares how he counsels his clients.
“We meet with our clients and advise them of all the responsibilities associated with a MSA, including a recommendation the MSA be professionally administered. The decision on who should professionally administer the MSA is critical to ensure compliance with CMS and protecting the client’s Medicare eligibility. We recommend our clients consider multiple issues in determining who should professionally administer their MSA, including whether the professional administrator is a group that is aligned with our client’s best interest; are they deeply knowledgeable; are they transparent; do they release public information on their financial health, and do they have high levels of regulatory and financial oversight?”
Conclusion
The Clearwater case serves as a cautionary tale of what can go wrong when professional administration partners fail to meet basic standards of transparency, accountability, and security. By carefully evaluating potential partners and prioritizing those with robust regulatory oversight, transparent practices, and strong cybersecurity measures, the workers’ compensation industry can safeguard the financial futures of injured individuals.
When choosing a professional administration partner, don’t settle for anything less than the highest standards of regulation, transparency, and security. By asking the right questions and demanding accountability, you can ensure settlement funds are in safe hands, giving stakeholders peace of mind to focus on recovery and future needs.
About Porter Leslie
Porter directs the growth of Ametros and works with its many partners and clients. He built his career leading customer-focused businesses in the healthcare and financial services industries. Porter earned a B.A. in Economics from Columbia University, as well as an MBA from the Wharton School and an M.A. from the Lauder Institute at the University of Pennsylvania. Porter speaks Spanish and Portuguese and resides in Boston with his wife and three children.
