The Texas Third Court of Appeals issued its opinion in the lead Texas air ambulance case on January 31, 2018.PHI Air Medical, LLC v. Texas Mutual Insurance Company, Hartford Underwriters Insurance Company, TASB Risk Management Fund, Transportation Insurance Company, Truck Insurance Exchange, Twin City Fire Insurance Company, Valley Forge Insurance Company, et al., No. 03-17-00081-CV, (Tex. App.—Austin Jan. 31, 2018, no pet. h.).
The court of appeals’ opinion reverses the trial court’s judgment in favor of the carriers and remands the case to the trial court for further proceedings. The court of appeals held that the federal Airline Deregulation Act (ADA) preempts Texas’ workers’ compensation laws that regulate reimbursement to air ambulance carriers. The court also held that the McCarran-Ferguson Act (MFA) does not prevent ADA preemption in this case. Whether the MFA applies to prevent inadvertent federal preemption depends on whether the state laws regulate the “business of insurance.” The court held that the Texas statutes that direct workers’ compensation carriers how much to reimburse health care providers do not regulate the “business of insurance,” although the basis for that decision is not entirely clear.
The U.S. Supreme Court has held that state laws that prescribe the terms of the insurance policy directly regulate the “business of insurance.” The carriers argued that Texas’ workers’ compensation laws do precisely that in this case. The terms of the workers’ compensation policy are literally the Workers’ Compensation Act and Division rules. Workers’ compensation carriers are required to use a standard policy written by the Texas Department of Insurance which provides that carriers must pay the benefits required by the workers’ compensation law. The policy itself is only two pages long because it incorporates Texas’ workers’ compensation laws. Thus, the state actually writes the terms of the workers’ compensation policy which the U.S. Supreme Court has recognized falls squarely within the business of insurance.
The court of appeals’ opinion leaves numerous unanswered questions including the Division’s authority to decide air ambulance fee disputes if it can’t apply its fee guidelines to determine reimbursement; the standards to be applied to determine reimbursement in the absence of the Division’s fee guidelines; and whether the carriers have any obligation to pay more than the amount provided by the Division’s fee guidelines since that is all they are contractually obligated to pay under their policies.
The insurance carriers will likely file a motion for rehearing with the court and if necessary, a petition for review in the Texas Supreme Court. The federal preemption issue is also pending in federal district court in Austin in the case of Air Evac EMS, Inc. v. State of Texas, Ex Rel. Department of Insurance, Division of Workers' Compensation et al. Briefing in that case is currently scheduled to end May 7, 2018.