Texas Mutual: Judge Upholds State Regulation of Air Ambulances

A Texas district court judge in Austin has upheld the state’s right to regulate fees paid to air ambulances for transporting patients covered by workers’ compensation insurance, according to Texas Mutual Insurance Co.

This case involved litigation over whether the federal Airline Deregulation Act of 1978 prevents state workers’ compensation fee caps.

The Airline Deregulation Act was intended to free commercial passenger airlines, whose customers can price shop in competitive markets, from rate regulation, Texas Mutual reported.

Unlike commercial air passengers, air ambulance patients cannot price shop and won’t know how much the air ambulance company will charge until after the transport.

PHI Air Medical LLC wanted the court to find that the Airline Deregulation Act “preempts” guidelines set by the Texas Department of Insurance, Division of Workers’ Compensation regarding what insurers pay for transports of injured workers and instead requires insurers to pay its full billed charges.

District Court Judge Stephen Yelenosky sided with Texas Mutual, upholding the state’s workers’ compensation reimbursement rate at 125 percent of the Medicare-approved fee.

Judge Yelenosky noted that the McCarran-Ferguson Act, passed by Congress in 1945 to protect state rights to regulate the insurance industry, preempts the Airline Deregulation Act as it applies to payment in the workers’ compensation system.

In the company’s announcement, Texas Senior Vice President and General Counsel Mary Nichols said: “Air ambulances charge 500 to 700 percent of their costs. These charges are often $40,000 or more versus actual costs of $7,000 or so.”

Nichols added that the “case is important for all consumers because, although the court’s order specifically applies to workers’ compensation patients, more and more people are winding up with financially devastating medical bills from being ‘balance billed’ for emergency air transport.”

Source: Texas Mutual Insurance Co.