Air ambulance reimbursement disputes complicate workers' comp matters

Although air ambulances save lives, the issue of whether state laws establishing air ambulance reimbursement rates are preempted by the federal Airline Deregulation Act of 1978 (ADA) continues to be heavily litigated in federal and state courts across the country.

A lot is at stake since the costs of air ambulance bills can be as high as $50,000, according to a GAO report published July 2017.  The Association of Air Medical Services estimates that more than 550,000 patients in the U.S. use air ambulance services every year. According to the Insurance Council of Texas, the Texas Division of Workers’ Compensation has more than 1,000 air ambulance disputes pending but has abated any further decisions pending the outcome of litigation in federal and state courts. The aggregated amount in dispute exceeds $35 million.

Disputes regarding air ambulance reimbursement occur in workers’ compensation in part because many states base their workers’ compensation fee schedules on Medicare reimbursement schedules and methodology. Air ambulance providers accept the reimbursement rates in the Medicare ambulance service fee schedule for Medicare and Medicaid patients. The federal Airline Deregulation Act of 1978 (ADA), however, removed any government controls of pricing and expressly prohibits states from enacting or enforcing “any law, rules, regulation, standard or other provision having the force and effect of law related to a price, route, or service of an air carrier.”

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Judicial activity

The following is a summary of some of the air ambulance workers’ compensation decisions in federal and state courts across the country.

• In a case that is currently on appeal to the Texas Supreme Court, the Texas Third Court of Appeals ruled in Texas Mutual Insurance Co. v. PHI Air Medical that the ADA preempts state law. This decision overturned the finding of a Texas state district court that the McCarran-Ferguson Act removes the Texas workers’ compensation fee guideline for air ambulance providers from the ADA preemption. The McCarran-Ferguson Act — another federal law — exempts the business of insurance from most federal regulation.  
• On August 2, 2018, the U.S. District Court for the Western District of Texas issued an order finding that Air Evac EMS Inc. was entitled to a permanent injunction prohibiting the Texas Department of Insurance’s Division of Workers’ Compensation from enforcing Texas state law and rules for medical fee reimbursement. 
• A petition for review was filed with the Kansas Supreme Court in Eaglemed LLC v. Travelers Insurance after the Court of Appeals of Kansas ruled on June 15, 2018, that the ADA preempts Kansas state law regulating air ambulance charges. Rather than dispute ADA preemption, Travelers Insurance contends that air ambulance charges are limited by the federal Medicare Fee Schedule, or alternatively, that state courts can examine the charges for reasonableness, since this is the standard for medical expenses under both state and federal law.
• On Oct. 31, 2018, the federal Court of Appeals Court for the Fourth Circuit in West Virginia heard oral arguments in the case of Air Evac EMS Inc. v. Cheatham. This case was appealed after a federal district court ruled that the ADA preempts state workers’ compensation law.
• In August 2017, the U.S. Court of Appeals for the Tenth Circuit in EagleMed LLC v. Cox affirmed the district court’s holding that the ADA preempts the Wyoming fee schedule and an injunction permanently enjoining the state from enforcing the rate schedule against air ambulance companies, but reversed the district court’s order that the state pay full billed charges holding that the order was an overreach by federal courts.
• In 2013, the California Workers’ Compensation Appeals Board in Enriquez v. Couto Dairy and Zenith Insurance Company found that if the air ambulance provider was an air carrier as defined by the ADA, the state workers’ compensation fee schedule was preempted by ADA.

Air ambulance reimbursement disputes are also occurring for automobile claims. On May 8, 2018, the federal Court of Appeals for the Eleventh Circuit held in Bailey v. Rocky Mountain Holdings LLC that the ADA preempts a provision of Florida’s automobile insurance law.

Other air ambulance cases involve reimbursement disputes between consumers being balanced billed for costs not reimbursed by their health insurance carriers.

Related: Insurance Antitrust Exemption: Why the Mccarran-Ferguson Act Remains a Political Issue

Federal legislation

As these cases advance through courts across the nation, many are looking to the federal government to address this conflict legislatively.

Montana Sen. John Tester introduced the Isla Rose Life Flight Act, Senate Bill 471, to preserve state authority to regulate air carriers providing air ambulance services. This bill would allow states to enact laws and regulations governing network participation, reimbursement, balance billing and transparency.

On Oct. 5, 2018, President Donald Trump signed the Federal Aviation Administration (FAA) Reauthorization Act of 2018 (H.R. 302) into law. This legislation includes several provisions aimed at addressing air ambulance pricing and reimbursement. The bill requires the Secretary of Transportation, in consultation with the Secretary of Health and Human Services, to make recommendations regarding:

• Disclosure of charges and fees for air ambulance services and insurance coverage;
• Consumer protection;
• Enforcement authorities of both the Department of Transportation and State authorities; and
• Prevention of balance billing to consumers.

Within 180 days after receipt of the advisory committee’s report, the Secretary of Transportation is required to report to Congress how air ambulance oversight will be conducted.

Hopefully, this bill will result in some stability in the reimbursement rates for this life-saving service.

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Desiree Render is Assistant Vice President, National Claims Technical Compliance for workers’ compensation at Sedgwick. She can be reached at Desiree.Render@sedgwick.com.