Texas Appeals Court: Federal Law Preempts State on Air Ambulance Fees

A Texas appeals court has ruled that federal law, as opposed to state regulation, prevails when it comes to the amount an air ambulance service may charge insurance companies for its services.

The Austin Court of Appeals’ ruling reverses previous decisions by the State Office of Administrative Hearings and a trial court that found the federal Airline Deregulation Act (ADA) did not preempt the Texas Workers’ Compensation Act provisions that allow the Texas Department of Insurance, Division of Workers’ Compensation (DWC) to set fee guidelines for insurer reimbursements to air ambulance service providers.

That ruling came in an appeal by PHI Air Medical LLC in a lawsuit involving Texas Mutual Insurance Co. and a number of other insurance companies over reimbursement rates.

Texas Mutual pointed out in an emailed statement that while the appeals court struck down the fee guideline developed by the DWC, “the court did not order the insurers to pay billed charges.”

DWC had set a payment guideline of 125 percent of Medicare for reimbursements to air ambulances. According to the appeals court, the trial court previously determined that insurers could not be required to pay more than that amount.

The ADA, enacted in 1978, deregulated the airline industry, allowing to commercial airlines set competitive rates.

The appeals court decision states that PHI, as a commercial air ambulance provider, “charges for that service by billing a ‘per-trip charge’ and an additional charge for the miles transported.”

According to Texas Mutual, “air ambulances use [the ADA] to attempt to recover their full billed charges (which are often 500 percent or more of their costs).”

In its emailed statement, Texas Mutual said the appeals court in its ruling “relied on several cases from other jurisdictions that reach the same result (although many of them are still on appeal). And none of these courts has ordered insurers to pay billed charges either.”

The insurer seemed to indicate that the fight to contain air ambulance service fees would continue, stating: “… if in the end the state laws are actually preempted by a federal act, participants face a void: no court would have apparent authority to order the insurers to pay anything other than their contractual obligation to pay state-set charges.”