OIEC Files Amicus Brief in Air Ambulance Appeal

The Office of Injured Employee Counsel jumped into the air ambulance litigation by filing an amicus curiae brief with the Texas Supreme Court this month. More than 600 air ambulance disputes remain pending on a holding docket at the State Office of Administrative Hearings while the question of whether bills from those providers can be regulated by the Division of Workers’ Compensation is being litigated in federal and state appellate courts.

The litigation underlying OIEC’s decision to file an amicus brief is tangled. Several years ago, the air ambulance industry began claiming that its bills were not bound by or subject to state workers’ compensation fee guidelines on the basis the federal Airline Deregulation Act preempted state law. This issue has been making its way through courts across the country with various presentations and outcomes.

In December 2016 we published an FOL Advisory discussing the then current state of the litigation, which has been denominated as Texas Mutual Ins. Co. v. PHI Air Medical, LLC, Cause No. 18-0216. In that case, a Texas state district judge, agreed with carriers that air ambulance bills were subject to state regulation by the Texas Department of Insurance and the Division of Workers’ Compensation. The Third Court of Appeals disagreed, siding with the air ambulance providers that the Airline Deregulation Act preempted state regulation of their bills. The carriers have filed a petition for review with the Texas Supreme Court, which is presently pending before that court.

OIEC argues that it brings “a unique perspective on the impact of the lower court’s decision to invalidate the application of the workers’ compensation fee schedule to air ambulance carriers while refusing to identify the party responsible for paying amounts billed in excess of the fee schedule.” OIEC’s concern centers on whether air ambulance providers can balance bill injured workers’ for that portion of their bills not paid by the carriers. Texas Labor Code § 413.042 prohibits balance billing of charges for compensable claims.

In its brief, OIEC urges the Supreme Court to “provide instructions on how lower courts should deal with the inevitable debt collection battles that will be spawned by the [Third Court of Appeals’] decision.” Drawing the court’s attention to similar litigation taking place in Wyoming, OIEC claims that the Wyoming Department of Workforce Services has argued that ADA preemption of the fee schedule leaves the Department with an open-ended obligation to pay air ambulance bills without any statutory authority to pay amounts in excess of the fee schedule. Therefore, it has refused to pay any amount billed. OIEC contends that the Wyoming litigation shows how a decision regarding preemption of the medical fee schedule without clarity about the party responsible for paying is unworkable.

OIEC asks the court to take this opportunity “to clarify that under Texas law, injured employees are never liable for any portion of the payment for medical treatment for a compensable workplace injury.”

Unless the court defines the limits of ADA preemption, OIEC predicts that air ambulance carriers “will launch a second wave of litigation actions against injured employees” to collect amounts billed in excess of the fee schedule. It supports this assertion by citing to a series of news and public interest reports detailing the adverse financial consequences of balance billing in air ambulance cases.

News agencies continue to document the aggressive tactics employed by air ambulance firms to collect medical debt. John Tozzi, Air ambulances, backed by private equity firms, leave patients with $45,000 bills, L.A. Times, Jun. 11, 2018, available at http://www.latimes.com/business/la-fi-air-ambulance-cost-20180611- story.html (employee collapsed and hit head at work, flown 18 miles by helicopter, later dies and Air Methods’ subsidiary sent the family a bill for $34,495 and put a lien on estate). Susannah Luthi, Congress angles for air ambulance cost transparency, Modern Healthcare, Oct. 2, 2018, available at https://www.modernhealthcare.com/article/20181002/TRANSFORMATION04/18 1009977 (a lien was placed on one North Dakotan’s home; another had wages garnished; families have gone into bankruptcy). Angela Elizabeth Perry, Up in the Air: Inadequate Regulation for Emergency Air Ambulance Transportation, ConsumersUnion.org, Health Policy Report, March 2017, available at www.consumersunion.org or available at https://advocacy.consumerreports.org/wpcontent/uploads/2017/04/Up-In-The-Air-Inadequate-Regulation-for-EmergencyAir-Ambulance-Transportation.pdf (Air Methods filed hundreds of debt collection 12 lawsuits against transported patients and their families over the last five years, including 104 lawsuits in South Carolina alone; In Maryland, patients testifying at a 2015 hearing complained about receiving balance bills from $20,000 to $40,000 from air ambulance companies, followed by weekly calls from bill collectors, who threatened to put liens on their homes).

The case remains pending on the petitioners’ petition for review. There is no deadline for the Supreme Court to decide whether to accept and hear the case.

Meanwhile, this past summer, a Federal District Judge in Austin joined several courts nationally in ruling that the Federal Airline Deregulation Act preempts state laws that attempt to place limits on the amount that air ambulances can charge workers’ compensation carriers for their services. In so doing, the Federal Court concluded that the McCarran-Ferguson Act, which commits the regulation of the business of insurance to the States and preempts the Federal government from interfering in those regulatory systems, does not reverse preempt the ADA because, it reasoned, the Texas Workers’ Compensation Act is not a regulation having to do with “the business of insurance.”

To be fair to Defendants, there is evidence supporting the argument that the Texas Legislature enacted the TWCA as a whole to regulate the business of insurance. In instituting the TWCA, the Texas Legislature attempted to design a workers’ compensation system by balancing the interests of the two types of insureds employees subject to the risk of injury and employers and insurance companies. In re Poly-Am., 262 S.W.3d at 352; see also Aranda v. Ins. Co. of N. Am., 748 S.W.2d 210, 212 (Tex. 1988) (stating the TWCA addresses a three-party insurance agreement entered into by the employer, employee, and insurance carrier), overruled on other grounds by Texas Mut. Ins. Co. v. Ruttiger, 381 S.W.3d 430 (Tex. 2012). But, to the extent the TWCA restricts the relationship between insurers and third-party service providers, the TWCA regulates the “business of insurance companies” rather than the “business of insurance.” See Pireno, 458 U.S. at 132 (“To grant the [cost savings] practices a § [101 2](b) exemption on such a showing would be plainly contrary to the statutory language, which exempts the ‘business of insurance’ and not the ‘business of insurance companies.” (internal quotation marks and citation omitted)).

The court’s opinion, authored by Senior Federal District Judge Sam Sparks, has been appealed to the Federal Court of Appeals for the Fifth Circuit and, very possibly, to the U.S. Supreme Court after that.