By B. Josh Pettingill, MBA, MS, MSCC
Reversionary clauses are a go-to tactic for insurance carriers in workers’ compensation settlements involving Medicare Set Asides (MSAs). Once limited to catastrophic cases, they’re now pushed in nearly every settlement. Most attorneys know these clauses reduce client recoveries, but few understand the full impact or the best ways to challenge them.
A reversionary clause means any money left in the MSA when your client dies goes back to the carrier, not their family. Carriers argue they should only pay for care while the claimant is alive. I counter that once the settlement is paid, all funds belong to the injured worker and their family.
What Are MSAs and Reversionary Clauses?
An MSA is a portion of a workers’ compensation settlement set aside to cover future medical expenses that Medicare would otherwise pay. A reversionary clause allows the carrier to reclaim unused MSA funds after the claimant’s death, reducing what’s left for the family.
The most a claimant can lose equals the total MSA value. If there’s a $50k lump sum funded MSA with a reversionary clause, then $50k is the maximum loss exposure. I’ve handled multiple cases where the claimant passed away shortly after settlement, before any funds had been disbursed from the MSA account. Fortunately, none involved a reversionary clause, or the carrier would have gotten a substantial refund.
CMS also allows MSA obligations to be annuity funded with an initial deposit plus annual structured settlement payments over the claimant’s life expectancy. With reversionary clauses, carriers may want both the upfront cash remaining in the account and any guaranteed annuity payments remaining on the structure. For instance, if a claimant dies with $15,000 remaining in their MSA account plus 10 years of guaranteed $5,000 annual payments, the carrier could potentially reclaim $65,000 total.
Why This Matters
Many carriers now incorporate reversionary clauses in their internal guidelines regardless of MSA size. Professional administration companies enforce them by tracking balances and returning funds to carriers when the claimant passes. Some administrators even share revenue or pay referral fees to the carrier or their structured settlement broker, creating troubling conflicts of interest.
The Role of Professional Administration
Professional administration ensures MSA funds are used correctly, records are kept, and Medicare eligibility stays protected. It’s a lifesaver for claimants who don’t want to manage complex accounts. However, when reversionary clauses are involved, some administrators may also return unused funds to the carrier after the claimant’s death, raising concerns about whose interests are being served. This is why reversionary clauses never happen in self-administered MSAs—without a third-party administrator, there’s no easy way to monitor the balance or enforce the return of funds.
Solution: Ensure your client selects the administrator, and the agreement has no carrier-friendly language.
What Does CMS Say About Reversionary Clauses?
The WCMSA Reference Guide (Version 4.4, July 14, 2025, Section 19.2, Page 68) states:
“If the beneficiary dies before the WCMSA is completely exhausted, the remaining funds must be distributed according to the appropriate state probate laws.”
Reversionary clauses aren’t referenced in any CMS policy memoranda or the WCMSA Reference Guide. However, the Guide provides clear guidance on what should happen to remaining MSA funds upon the claimant’s death. Reversionary clauses directly contradict that guidance.
While CMS doesn’t directly police this issue, leverage this to challenge why a carrier’s internal policy should override CMS guidance and probate law. This forces the carrier to justify recovering funds that should remain with the injured worker’s family.
Where Reversionary Language Hides
Besides the mediation agreement, they bury reversionary clause language in multiple settlement documents to block claimants from naming their own beneficiaries post-settlement:
| Document Type | Common Reversionary Language | Action to Take |
| Release Agreement | “Upon claimant’s death, remaining funds revert to carrier.” | Strike reversion language; ensure claimant retains control. |
| Qualified Assignment1 | “Any remaining payments return to the carrier.” | Demand claimant’s right to name beneficiaries. |
| Annuity Contract | “Payments cease or revert upon death.” | Negotiate for period-certain or beneficiary provisions. |
| Administration Agreement | “Unused funds returned to carrier post-death.” | Ensure administrator serves claimant, not carrier. |
Push Back Early with Your Demand
Get ahead of reversionary clauses from the start. Add this language to your demand package:
- There will be no reversionary clause as part of any resolution.
- The claimant reserves the right to take a portion of the settlement proceeds in the form of a structured settlement.
- The claimant reserves the right to purchase a guaranteed annuity to fund the MSA obligation.
- The claimant reserves the right to select the MSA administrator.
- The carrier will cooperate fully and sign all required structured settlement documents.
- Any structured settlement will be brokered or co-brokered by Josh Pettingill (or other plaintiff structure broker).
This language protects your client, your firm, and your peace of mind if negotiations go sideways. Waiting until mediation to address these issues is too late—carriers will dig in. By including this language upfront, you signal you’re not playing their game.
Who Chooses the Administrator?
Your client should pick the MSA administrator. Carriers can cover the cost, but they don’t get to choose. Many administrators offer lifetime services for little or no cost, especially for cases with long-term drug costs.
The Approved Lists Trap
Carriers push approved lists of preferred vendors for everything involved in the claims process, including MSA administration and annuity funding. These lists prioritize carrier profits, not claimant payouts. Top-rated providers like USAA (A++ rated by AM Best) are often excluded for inferior options at the expense of the claimant. Ask opposing counsel: Is there a financial arrangement with their preferred vendors? Demand proof in writing.
Without your own structured settlement expert protecting your interests, the claimant may end up with less money simply because the carrier is steering the case toward limited options with inferior rates.
A qualified settlement consultant will:
- Hold carriers accountable.
- Disclose all market options.
- Secure the best rates.
- Protect you and your client throughout.
Temporary Life Annuities: When They Work
Carriers push temporary life annuities to fund the MSA obligation because they’re the cheapest option, with payments stopping when the claimant dies or reaches life expectancy. If the claimant dies prematurely, the annuity company gets a windfall because they’re off the hook from making further payments. Use this type only when:
- The claimant has no dependents to benefit.
- You negotiate an all-inclusive settlement, so any cost savings to fund the MSA obligation boosts the upfront cash portion to the claimant.
It’s almost always best to negotiate for an all-inclusive number—not X amount of dollars plus the MSA. We can likely do better on finding an annuity that costs less than what the carrier’s broker is proposing, which means any cost savings become a windfall of upfront cash for the claimant, not the carrier.
For claimants with families, demand guaranteed payments on the structured settlement with the family as beneficiary, not the carrier. Negotiate for the carrier to cover the present value cost difference to pay for the guaranteed annuity, which in most cases is negligible compared to the benefit received.
In Rare Cases
Only consider reversionary clauses in extreme scenarios: cases with short life expectancies, desperate claimants who want out of the comp system, or large MSAs. If you agree to one, negotiate limits:
| Tactic | Description |
| Cap Reversion Percentage | Limit the amount that reverts to the carrier. Instead of allowing full reversion, suggest capping it at 10 percent or 25 percent. |
| Separate Non-Medicare Services | Exclude expenses that are not Medicare covered from the reversion provision. High-cost items like van replacements or attendant care should remain with the claimant’s family2. |
| Limit Annuity Reversion | If the case involves a guaranteed annuity payout over 20 years, propose that only a portion such as 5 years can revert, rather than the entire remaining balance. |
Remember: A dollar today is worth significantly more than a dollar paid in the future. This matters when battling the terms of the reversionary provision. Depending on the makeup of the MSA, it may be better for the family to receive the remaining cash in the account and the carrier to be the beneficiary of future periodic payments.
Pro Move: Turn the Tables
In a recent mediation, the claimant’s attorney played a carrier’s greed against them. He said he would agree to a reversionary clause only if the carrier fully funded a $1.3 million MSA with a lump sum instead of a structured settlement.
The strategy: He used their own internal guidelines against them. The carrier was never going to choose full lump sum funding when they could use a structured settlement to satisfy the obligation for a fraction of the price.
The result: The carrier not only dropped the reversionary clause, but the structured settlement we secured cost $22,604 less than what the carrier’s approved broker had proposed ($578,978 vs. $601,582). That savings went directly into the claimant’s pocket.
The takeaway: Sometimes the best way to eliminate a reversionary clause is to make it more expensive than the alternative. Force the carrier to choose between their cost savings and their standard contract language.
The Bottom Line
Every time you agree to a reversionary clause, the carrier saves money and your client loses value. Know the game. Push back early and often. Build strong language into your demand. And make sure your client keeps control of the money they deserve.
Josh Pettingill is a structured settlement consultant who specializes in workers’ compensation cases and Medicare Set Aside arrangements. He helps attorneys maximize settlement value and optimize recoveries using data driven insights. He is also a certified Medicare Set Aside Consultant. Josh can be reached at 321-291-1818 or josh@winsomsettlements.com for a free case review.
1 The qualified assignment transfers the carrier’s obligation to make future periodic payments to a third-party assignment company, typically used to fund a structured settlement.
2 I’ve seen carriers try to claim handicap accessible vans or even the claimant’s home after their death.