Insurers Score a Win in Texas Air Ambulance Fee Dispute

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State law prevails in disputes between insurers and an air ambulance service over reimbursements under the Texas workers’ compensation system, the state’s highest court recently ruled.

In Texas Mutual Insurance Co., et al, v. PHI Air Medical Inc., the Texas Supreme Court held that the Texas Workers’ Compensation Act (TWCA) and Division of Workers’ Compensation Rules, which require reasonable reimbursement to privately owned air ambulance services, are not preempted by federal law.

In the suit, PHI, like other air ambulance services across the country, had argued the federal Airline Deregulation Act (ADA), which contains no reimbursement requirement, preempts state law and therefore insurance carriers were required to pay the full amount of bills charged by air ambulance companies. The ADA, enacted in 1978, deregulated the airline industry, allowing to commercial airlines set competitive rates.

Insurers typically have reimbursed an amount equal to 125% of Medicare reimbursement amount for air ambulance services, according to an analysis of the case written by Robert R. Graves, an Austin-based partner in the law firm Burns Anderson Jury & Brenner L.L.P. The amounts often charged by air ambulance providers are often far above the reimbursement amount allowed under the TWCA, however.

Several other insurance companies had joined Texas Mutual in its lawsuit against PHI. In a statement, Texas Mutual said the Texas Supreme Court in its opinion released on June 26, “decided in favor of insurers and state regulators in a dispute that was sparked when privately-owned air ambulances began demanding that workers’ compensation insurers pay their full billed charges, unrestricted by the law that says payments must be ‘fair and reasonable’ or by any other constraint.”

In the Court’s majority opinion, Justice Brett Busby, wrote that the case is “about federalism.” He said the court looked at whether a federal law deregulating aviation services may override a state’s authority to “require that private insurance companies reimburse the fair and reasonable medical expenses of injured workers” and “require Texas to mandate reimbursement of more than a fair and reasonable amount for air ambulance services.”

In both instances, the Court said “no.”

Under the ADA, states are not required “to provide for payment of air ambulance charges,” Busby wrote. But, he said, “PHI is trying to use the ADA’s preemption clause to have it both ways under state law: PHI relies on Texas law requiring that private insurers reimburse it for air ambulance services to injured workers, yet it argues that the Texas standards governing the amount of that reimbursement are preempted.”

A trial court had earlier issued a summary judgment in the case declaring there was no preemption of state law by the ADA but a court of appeals reversed that ruling. The Texas Supreme Court reinstated “the portion of the trial court’s summary judgment declaring no preemption.” It also remanded to the appeals court other issues in the case it did not previously address.

The issue is not limited to Texas. In a media release, Texas Mutual said air ambulances nationwide “have claimed that states cannot regulate their rates and must therefore award them whatever payments they demand. Consumers and regulators have become increasingly alarmed at the growing size of these bills.”

Air Ambulances’ Sky-High Charges Leave Reimbursement Gaps, Lawsuits The U.S. air-ambulance fleet has doubled in size in the past 15 years to nearly 900 helicopters making 300,000 flights annually, according to data compiled by Ira Blumen, a professor of emergency medicine and director of University of Chicago Aeromedical Network.

In his analysis, Robert Graves pointed out that PHI could ask Texas’ high court rehear the case and/or seek review by the U.S. Supreme Court. The U.S. Fifth Circuit Court of Appeals also is considering similar issues in Air Evac EMS, Inc. v. Sullivan, No 18-50722, Graves wrote.

Other States

North Dakota Insurance Commissioner Jon Godfread has taken a particularly aggressive stance against air ambulance service operators in his state, and has called on the U.S. Senate to tackle the problem of surprise air ambulance bills.

According to the North Dakota Insurance Department, 32 complaints were filed with the department between 2013 and 2017 over uncovered charges for air ambulance services that totaled $1.77 million. Based upon these complaints, each air ambulance ride cost the consumer $55,341 on average, the department said.

In February of this year, Godfread alleged AirMedCare Network was breaking the law by selling air ambulance subscriptions to North Dakotans illegally and issued a cease and desist order against the company. The state in 2017 had banned the practice of selling subscription plans because they have been shown to be predatory, the department said.

In January 2019, the Missouri Department of Insurance published a study of the high cost of air ambulance services in that state. Air ambulances billed Missourians nearly $26 million for services in 2017, leaving patients with $12.4 million in bills after coinsurance, copays and deductibles, for an average cost of around $20,000 per person, the report showed.

The report found that insurance companies can’t negotiate prices with many air ambulance services because they are not “in-network” providers. And the study found many air ambulance companies use collection practices such as placing liens on homes or garnishing wages if patients are unable to pay the bills.

Medicare reimbursement rates for air ambulance services range between $3,368 and $6,404 and Medicaid reimbursements average $2,253. In contrast, private health insurers in Missouri were billed an average of $41,321, of which they paid an average amount of $23,087, according to the report.