The current dispute between air ambulance companies and state workers' compensation system attempts to regulate their fees is an interesting study on how different laws, enacted at different times for different purposes, even within the same jurisdiction, can create conflicting interpretations.
The legal crux of this conflict of laws is whether the federal Airline Deregulation Act – which prohibits states from enforcing any law or regulation relating to an air carrier's price, route or service – preempts state law generated under authority of the federal McCarran–Ferguson Act.
In short, the McCarran–Ferguson Act gives states the authority to regulate the "business of insurance" without interference from the federal government, unless a federal law specifically provides otherwise.
The question then becomes whether workers' compensation is the "business of insurance" and what the intent behind the laws.
There's been some precedence at the state level.
Last October a federal trial judge in Florida found that the ADA barred a class-action suit over air ambulance service providers' billing and collection practices.
Two years ago California's 2nd District Court of Appeals declined to review a decision by the Workers' Compensation Appeals Board finding a state regulation setting the specific rates of reimbursement that a carrier must pay for air and ground ambulance services ran afoul of the ADA.
In Texas the issue has been brewing on a couple of fronts.
Last year an administrative law judge in the Texas State Office of Administrative Hearings found that state law was not pre-empted because of McCarran-Ferguson and ordered payment of air ambulance services at 149% of Medicare.
That decision has been appealed by both the air ambulance company, PHI Air Medical, and the insurance companies in the case to a state district court.
The other case, Air Evac vs. Texas State Department of Insurance, was filed last Thursday in the federal court in Austin, and seeks declaratory relief that state law is pre-empted and that the Department of Insurance, under which the Division of Workers' Compensation operates, can not regulate its fees.
The insurance companies argue the McCarran–Ferguson Act protects the Texas laws on air ambulance reimbursement from pre-emption by the ADA since the ADA "has nothing to do with insurance," because the ADA "was intended to address the commercial airline industry" and guarantee that a "competitive market" would set the rates for commercial air travel.
With air ambulance companies, the rational goes, there are no market forces, as there's no comparison shopping in an emergency situation because it is not commercial travel.
The flip side is that air ambulance companies have a lot of overhead costs in providing staffing and equipment around the clock, and also incur significant risk providing the service. In addition, they argue there is competition for customers with more than one provider in many geographic regions.
Finally, the air ambulance companies argue, workers' compensation is not the "business of insurance." Rather, it is a state program that happens to be funded, in part (don't forget about self-insurance, which is not insurance, and that in Texas workers' compensation is not compulsory) by insurance programs.
I can't predict how all of this will turn out. What I do know is that if I'm hurt and far, far away from medical services needed to save my life or limb, and the only option is an air ambulance, I don't care what it costs - get me to the doctor. If the courts rule that air ambulance services must abide by a state fee schedule, and that fee schedule is inadequate to the extent that the air transportation company is going to ask whether the matter is work comp before dispatch ... I may not make it to the doctor.
That's not tenable to me.