When an injured worker resolves a third-party liability claim arising out of the same injury covered by workers’ compensation, the law prevents double recovery by granting the workers’ compensation carrier a credit against future benefits, commonly referred to as a “holiday.” During this period, the injured worker must use the portion of the third-party liability settlement allocated to future medical expenses before the work comp carrier resumes payment responsibility.

While the concept is legally straightforward, the practical implications can be complex, particularly when future medical exposure, allocation issues, and Medicare Secondary Payer (MSP) compliance are involved. Professional Administration can play a critical role in navigating this process by ensuring funds are properly managed and documented, protecting ongoing benefit eligibility, and reducing compliance risk for all parties.

What Is a Workers’ Compensation Holiday?

A workers’ compensation holiday typically occurs when an injured worker settles a third-party liability claim related to the same injury covered by workers’ compensation benefits. Common examples include motor vehicle accidents, property liability incidents, or other third-party negligence claims arising during employment.

Because a workers’ compensation carrier has a statutory right of reimbursement, part of any third-party settlement is used to satisfy its lien for benefits already paid. However, lien repayment does not end the carrier’s financial exposure. In many jurisdictions, the carrier is also entitled to a future credit against ongoing medical benefits.

During a workers’ compensation holiday, the carrier temporarily suspends payment of injury-related expenses, and the injured worker must use the allocated portion of the third-party liability settlement to cover those costs. Once the credited amount is properly exhausted, the carrier resumes responsibility and becomes the primary payer for covered benefits.

Why Worker’s Compensation Holiday Exists

As mentioned above, in a third-party recovery, the workers’ compensation holiday exists to prevent double recovery. When an injured worker obtains a liability settlement for the same injury covered by a workers’ compensation claim, the law does not permit simultaneous recovery of both settlement funds and ongoing work comp benefits for the same medical expenses.

Instead, the carrier receives a credit against future medical exposure, and the injured worker must first exhaust the settled future liability medical funds before workers’ compensation resumes primary payer. While the concept is simple in theory, it can be complex, particularly when allocation disputes, lien issues, future medical projections, and Medicare compliance are involved. For plaintiff attorneys, understanding of how the holiday functions is critical to structuring settlements that protect the client’s recovery while avoiding unintended post-settlement complications.

How Professional Administration Supports Compliance

Professional administration involves specialized third-party management of settlement funds allocated for future medical care during the workers’ compensation holiday and beyond. Rather than placing complex compliance responsibilities on the injured worker, a professional administrator provides oversight by:

Managing Medical Payments

Medical bills are reviewed and paid directly from settlement funds in accordance with Medicare guidelines.

Verifying Medicare-Covered Treatment

Only qualified injury-related expenses are approved, helping prevent improper spending.

Maintaining Accurate Accounting

Every payment is documented, creating a clear audit trail that demonstrates the proper use of settlement funds.

Handling Reporting and Recordkeeping

Required documentation is maintained to support MSP compliance in the event of Medicare review.

Monitoring Fund Exhaustion

When credited funds are properly depleted, documentation supports reinstatement of workers’ compensation benefits or Medicare coverage when appropriate.

Benefits of Professional Administration for Plaintiff Attorneys

In today’s increasingly compliance-driven environment, professional administration is not simply an added service; it is a proactive strategy that helps safeguard settlement outcomes long after litigation concludes. Understanding how the workers’ compensation holiday functions and planning for it properly can significantly impact both your client’s financial security and your firm’s risk exposure.

• Professional MSA Administration helps ensure that settlement funds are properly allocated and documented
• minimizing the risk of Errors & Omissions (E&O) claims
• reducing potential malpractice exposure
• preserving eligibility for needs-based benefits
• providing peace of mind for both injured workers and plaintiff attorneys

And when the third-party liability funds are fully exhausted, Medivest can seamlessly transition to provide professional administration for the ongoing workers’ compensation claim as well, supporting compliance, simplifying claim management, and helping facilitate resolution if and when the carrier decides to move toward settlement.

About Medivest

Founded in 1996, Medivest is a national MSP compliance company and provider of settlement solutions. Our focus is assisting anyone settling a workers’ compensation or personal injury claim to understand their obligation to consider Medicare’s interests under federal law. Medivest provides pre- and post-settlement solutions that help mitigate exposure from that obligation. Contact us today at 877-725-2467 or contact us here.