A Legal Workaround?
States have long been told by the U.S. Department of Transportation (DOT) and various court rulings that they are prohibited from regulating air ambulance companies by the ADA, which explicitly prohibits states from enacting or enforcing any law related to “a price, route, or service of an air carrier.” When the ADA was passed in 1978, it was with the belief that deregulation would promote “efficiency, innovation, and low prices” among commercial airlines, and its intended beneficiaries were American consumers, not air medical stockholders. However, courts have consistently upheld that air ambulance providers qualify as air carriers for purposes of the ADA, and the DOT maintains that “state requirements with a ‘significant impact’ on an air carrier’s prices, routes, or services are preempted.”
But the level to which prices have risen has led many states to look for workarounds, and some believe they have found one in the McCarran-Ferguson Act of 1945. This act of Congress explicitly reserves the regulation of insurance to the states, except in cases where federal law specifically relates to “the business of insurance” — which the ADA does not.
When North Dakota passed its landmark air ambulance legislation in April of this year, it was careful to tie the provisions of that legislation to the business of insurance. The new law created service response zones for helicopter air ambulances “which are based on response times and patient health and safety,” and established primary and secondary call lists of air ambulance providers operating in the state. To qualify for the primary call list, a provider must be in network with health insurance carriers representing at least 75 percent of the health insurance coverage in North Dakota. Now, when a call for a request comes in, the recipient of the request must first reach out to the providers on the primary call list within the response zone. Only if none of them are willing and able to respond to the call may the dispatcher proceed to contact the providers on the zone’s secondary call list.
The North Dakota law also addresses the lack of transparency that has helped sustain air ambulance price increases. The ADA assumes the existence of informed consumers making free choices, which most of us are, when we compare airline ticket prices and book a flight on Southwest. However, most critically ill or injured patients have no control over which air ambulance is called for them, and are not told the price of the transport before the flight (which is why air ambulance providers concentrate their marketing efforts on the EMS organizations and hospitals doing the referring, not the patients themselves). The North Dakota law requires air ambulance companies to disclose their fee information, which is made available to referring agencies in advance. It also requires hospitals to make a reasonable effort to provide patients or their legal guardians with this fee information for the purpose of allowing them “to make an informed decision on choosing an air ambulance service provider,” unless a delay in transport might jeopardize their health or safety.
Air ambulance companies aren’t taking this without a fight. Valley Med Flight has filed suit against North Dakota in U.S. District Court, claiming that the law, H.B. 1255, is preempted by the ADA as well as by the Emergency Medical Treatment and Active Labor Act, which vests the treating physician with decision-making authority for emergency transport services. “By virtue of H.B. 1255, the dominant insurance carriers in the state, such as BCBS [Blue Cross Blue Shield], will effectively be setting the prices for air ambulance services,” Valley Med Flight observes in its complaint. The company states it has already been compelled to sign an agreement with BCBS “at rates that are substantially below the market rates charged by an air ambulance operator,” and that if it is unable to set the rates it needs to sustain its operations, it “will likely be forced to cease its critical life-saving operations in rural communities in North Dakota, with such cessation at the expense of the life and health of citizens in rural communities.”
Meanwhile, on Sept. 8, 2015, Texas Administrative Law Judge Craig R. Bennett issued a significant ruling in a dispute involving PHI Air Medical and insurance carriers in numerous workers’ compensation cases. According to a recent article by attorney James Loughlin, who represented insurance carriers in the dispute, air ambulance providers for many years accepted payment under the Texas Division of Workers’ Compensation’s medical fee guideline, which since 2002 has been set at 125 percent of the Medicare rate. Beginning in 2012, however, air medical companies began arguing that they were entitled to their full billed charges, which led to an explosion in the number of active medical fee disputes at the division, and the number appealed to the State Office of Administrative Hearings (SOAH).
In November 2013, SOAH’s Judge Bennett found that, due to the McCarran-Ferguson Act, the ADA does not preempt Texas guidelines for air ambulance reimbursement. He remanded a number of cases back to the Division of Workers’ Compensation, which, in a departure from previous decisions, began finding that air ambulance providers’ billed charges were “fair and reasonable” and ordered payment accordingly. Insurance carriers appealed, and 33 cases involving PHI were joined for hearing under the lead docket. After considering the evidence, Bennett ruled that neither PHI’s billed charges nor 125 percent of Medicare represented “fair and reasonable” reimbursement. Instead, he found the fair and reasonable amount to be 149 percent of the Medicare rate — which “reflects the per-transport amount of revenue that allows PHI to recover its costs and earn a reasonable profit,” and “neither unfairly subsidizes other patient populations nor requires subsidization by other populations.”
Neither Loughlin nor PHI responded to requests for comment on the case, but at press time, industry observers expected both PHI and the insurance carriers to appeal the ruling. While the ruling directly pertains to only a small number of air ambulance transports, its reference to the McCarran-Ferguson Act sets a precedent that other states and insurance companies will likely seize upon in their attempts to limit reimbursement. When Vertical asked AAMS for its opinion on the case, director of communications Blair Beggan stated, “The recent decision in Texas is under review, but it’s too early in the review process for AAMS to be able to comment.”
Air Ambulance facts and Cost factor