Minnesota Workers’ Compensation Settlements: Negotiations, Mediation, Medical Closure and the Settlement Process

Minnesota Workers’ Compensation Settlements: Negotiations, Mediation, Medical Closure and the Settlement Process

A Minnesota workers’ compensation case can settle at many different stages.

Some cases settle shortly after a dispute arises. Others settle after an independent medical examination, deposition, mediation, or even shortly before hearing.

But a workers’ compensation settlement is more than simply agreeing on a dollar amount.

The settlement documents determine exactly which benefits are being closed, which rights remain open, whether future medical treatment is included, and what happens after the agreement is signed.

Before accepting a settlement, an injured worker should understand both:

How much is being paid?

and

What rights am I giving up in exchange?

How Do Minnesota Workers’ Compensation Settlement Negotiations Begin?

Settlement discussions can begin in many ways.

An insurer may make an offer.

The employee’s attorney may make a demand.

The attorneys may begin informal discussions after important evidence develops.

Negotiations may also occur during:

• mediation;
• a settlement conference;
• depositions;
• pretrial proceedings;
• or discussions shortly before a hearing.

Minnesota law also allows formal written settlement offers in litigated cases.

The fact that settlement discussions begin does not mean either side is required to settle.

A settlement is voluntary.

What Is a Settlement Demand?

A settlement demand is an amount proposed by the employee to resolve some or all of the workers’ compensation claim.

The demand may be based on potential exposure for:

• Temporary Total Disability;
• Temporary Partial Disability;
• Permanent Total Disability;
• Permanent Partial Disability;
• rehabilitation;
• retraining;
• future medical treatment;
• future surgery;
• and other disputed benefits.

A demand is generally part of a negotiation strategy.

It should not be confused with an attorney’s final opinion of the exact value of the case.

Negotiations often involve movement by both sides before an agreement is reached.

How Does the Insurance Company Decide What to Offer?

An insurer may consider:

• benefits already paid;
• future wage-loss exposure;
• permanent restrictions;
• medical treatment;
• possible surgery;
• permanent disability;
• vocational rehabilitation;
• retraining;
• Medicare issues;
• IME opinions;
• treating-doctor opinions;
• litigation risk;
• and the likelihood of winning or losing at hearing.

An insurer may also discount future exposure because some benefits may never actually become payable.

That is why a settlement offer may be substantially less than the theoretical maximum value of all possible future benefits.

What Happens During Settlement Negotiations?

Negotiations usually involve offers and counteroffers.

For example:

• the employee may make an initial demand;
• the insurer responds with an offer;
• the employee may counter;
• additional information may be exchanged;
• and negotiations may continue until the parties reach agreement or decide they are too far apart.

The employee ultimately decides whether to accept a settlement.

An attorney can advise whether an offer is reasonable, but the settlement belongs to the client.

What Is Mediation?

Mediation is a settlement process in which a neutral mediator helps the parties try to reach an agreement.

Minnesota DLI explains that mediation can occur at different stages of a workers’ compensation claim and may involve a DLI mediator, private mediator, or mediator through the Court of Administrative Hearings.

The mediator does not decide the case.

The mediator cannot force either party to settle.

Instead, the mediator helps the parties evaluate:

• strengths;
• weaknesses;
• litigation risk;
• potential benefit exposure;
• and possible settlement terms.

What Happens at a Workers’ Compensation Mediation?

Mediation commonly begins with the parties explaining their positions.

Depending on the mediator, the parties may then separate into different rooms or virtual breakout rooms.

The mediator moves between the parties, discussing:

• settlement demands;
• offers;
• medical issues;
• vocational issues;
• litigation risks;
• and possible compromises.

The mediator may ask difficult questions of both sides.

That does not mean the mediator has decided against you.

A good mediator often tests each side’s assumptions in an effort to help the parties determine whether settlement is preferable to continued litigation.

Do I Have to Accept the Mediator’s Recommendation?

No.

A mediator may suggest a possible settlement range or make a mediator’s proposal.

You are not required to accept it.

The decision remains yours.

What Can Be Settled?

A Minnesota workers’ compensation settlement may resolve some or all of the benefits associated with a claim.

Potential benefits include:

• TTD;
• TPD;
• PTD;
• PPD;
• rehabilitation;
• retraining;
• medical treatment;
• past claims;
• future claims;
• or specific disputed issues.

The settlement language determines exactly what is closed.

What Is a Full, Final and Complete Settlement?

A settlement described as full, final and complete generally attempts to close broad categories of workers’ compensation benefits arising from the injury.

The precise meaning depends on the language of the Stipulation for Settlement.

A full, final and complete settlement may close rights to:

• future wage-loss benefits;
• additional PPD;
• rehabilitation;
• retraining;
• and potentially future medical treatment.

That is why the settlement document must be read carefully.

The phrase “full, final and complete” can have major consequences.

Can Only Part of a Claim Be Settled?

Yes.

A settlement can be structured to resolve only certain benefits.

For example, the parties might settle:

• wage-loss benefits;
• PPD;
• rehabilitation;
• or a specific disputed period

while leaving future medical treatment open.

This is sometimes referred to as a partial settlement.

Partial settlements can be useful when the parties want to resolve one part of a case but preserve other rights.

What Does It Mean to Leave Medical Benefits Open?

If future medical treatment remains open, the insurer generally remains responsible for reasonable, necessary, and causally related treatment for the work injury, subject to Minnesota workers’ compensation law.

That may include future treatment such as:

• office visits;
• diagnostic testing;
• injections;
• medications;
• physical therapy;
• surgery;
• and other appropriate care.

Leaving medical open can be particularly important when future treatment is uncertain.

What Does It Mean to Close Medical Benefits?

Closing medical means the employee gives up some or all rights to future workers’ compensation medical treatment in exchange for settlement consideration.

Once medical is closed, the employee generally assumes responsibility for future treatment covered by the settlement.

That can be a significant decision.

Before closing medical, consider:

• whether additional surgery is likely;
• whether medications will be needed;
• whether chronic treatment is expected;
• whether Medicare may become involved;
• and whether the settlement amount adequately reflects that risk.

Minnesota law requires additional approval protections when a settlement purports to fully and finally close medical or rehabilitation benefits.

Why Can Closing Medical Increase Settlement Value?

Closing future medical benefits transfers financial risk from the insurer to the employee.

For example, if a worker may need:

• another surgery;
• years of injections;
• medications;
• or ongoing specialist care,

the insurer is eliminating that potential future obligation.

That exposure should be considered in settlement negotiations.

The value of closing medical depends heavily on the facts of the case.

What Is Medicare’s Role in a Workers’ Compensation Settlement?

Medicare can become important when a settlement includes future medical treatment.

Workers’ compensation is generally primary to Medicare for treatment related to the work injury.

The parties must consider Medicare’s interests when resolving future medical expenses. CMS states that a Workers’ Compensation Medicare Set-Aside Arrangement, or WCMSA, is the recommended method of protecting Medicare’s interests in appropriate cases.

What Is a Medicare Set-Aside?

A WCMSA allocates part of the workers’ compensation settlement to pay for future work-related medical treatment that would otherwise be covered by Medicare.

The set-aside funds are used first for qualifying work-injury-related treatment before Medicare pays for those expenses.

A WCMSA does not necessarily apply to every settlement.

The analysis depends on:

• Medicare status;
• expected Medicare eligibility;
• settlement amount;
• future medical exposure;
• and current CMS guidance.

Does Every Medicare Set-Aside Have to Be Submitted to CMS?

No.

CMS states that there is no statutory or regulatory requirement that every WCMSA proposal be submitted for CMS review.

CMS does, however, publish review thresholds and recommends submission in qualifying cases.

As of 2026, CMS generally reviews proposed WCMSAs when:

• the claimant is a Medicare beneficiary and the total settlement exceeds $25,000; or
• the claimant has a reasonable expectation of Medicare enrollment within 30 months and the anticipated total settlement exceeds $250,000.

Those are CMS review thresholds, not automatic safe harbors from considering Medicare’s interests.

What About Medicare Conditional Payments?

Medicare may sometimes have paid medical expenses that workers’ compensation should have paid.

When that happens, Medicare may seek recovery.

CMS has a formal recovery process for resolving conditional-payment obligations after settlement.

This issue is separate from a Medicare Set-Aside.

A WCMSA generally addresses future Medicare-covered treatment.

Conditional-payment recovery generally concerns past payments made by Medicare.

What Is Subrogation?

A workers’ compensation settlement may also involve reimbursement claims from other entities that paid benefits related to the work injury.

Depending on the case, potential interests may include:

• health insurers;
• Medicare;
• Medicaid;
• short-term disability plans;
• long-term disability plans;
• or other benefit providers.

These interests may need to be addressed before settlement funds can be distributed.

Not every case has a subrogation issue.

What Is a Stipulation for Settlement?

The Stipulation for Settlement is the written agreement that documents the workers’ compensation settlement.

Minnesota DLI describes a settlement as a written agreement commonly prepared by the attorneys and signed by the employee, insurer, intervenors, and attorneys.

The Stipulation typically identifies:

• the employee;
• employer;
• insurer;
• date or dates of injury;
• disputed claims;
• benefits previously paid;
• settlement amount;
• attorney fees;
• intervenor interests;
• what benefits are closed;
• what benefits remain open;
• medical provisions;
• and other settlement terms.

Do not focus only on the dollar amount.

The closure language can be just as important.

What Is an Award on Stipulation?

After the parties execute the Stipulation for Settlement, it is submitted through the workers’ compensation system.

An Award on Stipulation formally approves or memorializes the settlement as required.

Minnesota law provides that certain settlements are presumed reasonable when both sides are represented, while settlements closing medical or rehabilitation rights require approval.

Once the Award on Stipulation is issued, the settlement becomes binding subject to the limited circumstances under which an award may later be vacated.

How Long Does It Take to Receive Settlement Money?

For settlements not subject to additional approval, Minnesota law provides that payment pursuant to the award must be made within 14 days after the award.

Timing in an individual case may also be affected by:

• processing of the Award on Stipulation;
• intervenor issues;
• Medicare issues;
• liens;
• attorney fees;
• costs;
• and how the settlement payment is structured.

How Are Attorney Fees Handled?

Minnesota workers’ compensation attorney fees are governed by Minn. Stat. § 176.081.

Attorney fees may be deducted from certain compensation paid to the employee, and different rules may apply to fees arising from medical or rehabilitation disputes.

The Stipulation generally identifies the attorney fee being withheld or paid.

Clients should review:

• gross settlement;
• attorney fee;
• case costs;
• other deductions;
• and expected net payment

before signing.

What Are Case Costs?

Case costs are expenses incurred in developing the workers’ compensation case.

Depending on the claim, they may include:

• medical-record charges;
• medical-report fees;
• deposition costs;
• expert fees;
• filing expenses;
• and other litigation-related expenses.

How costs are handled should be identified before the settlement is finalized.

Is a Workers’ Compensation Settlement Taxable?

Workers’ compensation benefits are generally treated differently from ordinary wages for federal income-tax purposes.

However, individual tax circumstances can vary, particularly when other benefit programs or settlement components are involved.

A workers’ compensation attorney can explain the nature of the payment, but specific tax advice should come from a qualified tax professional.

Can the Insurance Company Pay the Settlement in Installments?

Sometimes.

Many settlements are paid as lump sums.

Others may involve structured or periodic payments.

A structured settlement can sometimes be useful for:

• long-term financial planning;
• significant permanent disability claims;
• Medicare planning;
• or cases involving large settlements.

The terms must be clearly stated in the settlement documents.

What Happens If the Insurer Does Not Pay on Time?

Minnesota workers’ compensation law contains requirements governing timely payment of settlement awards.

If payment is not made when legally required, additional legal remedies or penalties may be available depending on the circumstances.

If settlement money is overdue, contact your attorney promptly rather than assuming the delay is normal.

Can I Change My Mind After Signing?

A signed and approved workers’ compensation settlement is not something an employee should assume can simply be cancelled.

Before signing, make sure you understand:

• the gross settlement;
• expected net amount;
• attorney fees;
• case costs;
• benefits being closed;
• medical status;
• Medicare issues;
• and what rights remain open.

Ask questions before signing.

Can a Workers’ Compensation Settlement Be Reopened Later?

Minnesota law allows an Award on Stipulation to be vacated only under limited circumstances.

The standard is much more demanding than simply showing that the employee later regrets the agreement or believes the case was worth more.

That is why settlement decisions should be made with the expectation that the agreement will be final.

What Should I Ask Before Accepting a Settlement?

Before agreeing to settle, make sure you can answer these questions:

• What is the gross settlement amount?
• What will I receive after attorney fees and costs?
• What wage-loss benefits am I giving up?
• Is permanent partial disability included?
• Is rehabilitation being closed?
• Am I giving up retraining rights?
• Is future medical open or closed?
• Do I expect future surgery?
• Does Medicare need to be considered?
• Are there liens or reimbursement claims?
• What happens if my condition worsens?
• When will payment be made?
• What happens if I do not settle?
• What are the risks of proceeding to hearing?

A settlement should make sense not only today, but in light of what may happen in the future.

Is Settlement Always the Best Option?

No.

Sometimes settlement provides valuable certainty.

It may allow the employee to:

• end litigation;
• receive a lump sum;
• control the funds;
• avoid future disputes;
• and move forward.

But settlement also requires giving up rights.

In some cases, continuing to receive benefits or preserving future medical treatment may be more important than settling immediately.

The right decision depends on the facts of the individual claim.

How Is Settlement Different From Going to Hearing?

Settlement involves compromise.

Neither side receives a judicial determination of every disputed issue.

At hearing, a compensation judge decides the disputed claims based on the evidence.

Settlement eliminates that uncertainty—but usually at the price of each side giving something up.

The decision often comes down to:

certainty now versus the risks and potential benefits of continued litigation.

Minnesota Workers’ Compensation Settlement Attorneys for Injured Workers

Lemmon & Tanasychuk, LLC represents injured workers throughout Minnesota.

We represent employees—not employers or insurance companies—in Minnesota workers’ compensation settlement matters involving:

• settlement negotiations;
• mediation;
• settlement valuation;
• future wage loss;
• medical closure;
• Medicare Set-Asides;
• rehabilitation;
• retraining;
• permanent disability;
• Stipulations for Settlement;
• and Awards on Stipulation.

We evaluate not only how much the insurer is offering, but also what rights the employee is being asked to give up in exchange.

If you have received a settlement offer, are preparing for mediation, or want to understand what a proposed settlement would actually close, contact Lemmon & Tanasychuk, LLC for a free consultation.

This article provides general information concerning Minnesota workers’ compensation law and is not legal advice. Settlement terms, Medicare obligations, statutory requirements, and individual rights depend on the facts of each claim.