549 S.W.3d 804
Tex. App.2018Background
- PHI Air Medical, LLC (air-ambulance provider) billed per-trip + mileage for transporting injured Texas workers; dispute arose over how much workers' compensation insurers must reimburse.
- Texas Workers' Compensation Act and agency rules set maximum-allowable-reimbursement (MAR) schedules (e.g., 125% of Medicare or Medicaid rates or a "fair and reasonable" rate).
- The Division initially found ADA preempted the state reimbursement provisions; an ALJ reversed and the trial court held the ADA did not preempt and limited recovery to 125% of Medicare. PHI appealed.
- Central legal question: whether the Airline Deregulation Act (ADA) preempts Texas statutes/rules that limit rates paid to air-ambulance providers, and whether the McCarran–Ferguson Act saves those state laws from preemption.
- Court concluded PHI is an "air carrier" under the ADA, the state rate-setting provisions are preempted as rules "related to a price, route, or service," and McCarran–Ferguson does not "reverse-preempt" those provisions.
Issues
| Issue | Plaintiff's Argument (PHI) | Defendant's Argument (Insurers) | Held |
|---|---|---|---|
| Whether ADA preempts Texas rate-setting provisions | ADA preempts state laws that fix rates for air carriers; PHI is an air carrier and rates are "prices" | State may regulate workers' comp reimbursement; provisions not preempted | ADA preempts the state statutes/rules to the extent they regulate air-ambulance rates |
| Whether PHI qualifies as an "air carrier" under ADA | PHI is a DOT-registered air taxi/air carrier providing air transportation | Insurers argued PHI is not a Subpart II air carrier because it lacks certain certificates | PHI is an air carrier (registered air taxi/air carrier) for ADA preemption purposes |
| Whether the McCarran–Ferguson Act "reverse-preempts" ADA (i.e., preserves state law regulating insurance) | State workers' comp statutes regulate insurance and thus fall within McCarran–Ferguson | Insurers: the fee schedules regulate the business of insurance and insurer–insured relations | McCarran–Ferguson does not apply: the reimbursement caps regulate provider pricing, not the insurer–insured relationship or the business of insurance |
| Severability of invalidated provisions | PHI argued rate provisions valid or nonseverable? (ALJ found nonseverable) | Insurers treated rate provisions as integral to Act | Court holds rate provisions severable from the rest of the Act; invalidity limited to rate-related provisions |
Key Cases Cited
- Morales v. Trans World Airlines, 504 U.S. 374 (1992) (ADA preemption clause construed broadly)
- Northwest, Inc. v. Ginsberg, 572 U.S. 273 (2014) (ADA preemption language is broad)
- EagleMed LLC v. Cox, 868 F.3d 893 (10th Cir. 2017) (air-ambulance rate regulation preempted by ADA)
- U.S. Dep't of Treasury v. Fabe, 508 U.S. 491 (1993) (McCarran–Ferguson focuses on insurer–policyholder relationship)
- Group Life & Health Ins. Co. v. Royal Drug Co., 440 U.S. 205 (1979) (distinguishing measures that merely affect insurer costs from "business of insurance")
- Union Labor Life Ins. Co. v. Pireno, 458 U.S. 119 (1982) (factors for defining "business of insurance")
- Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724 (1985) (three-factor approach for McCarran–Ferguson analysis)
- Hughes Air Corp. v. Public Utils. Comm'n of Cal., 644 F.2d 1334 (9th Cir. 1981) (carriers exempted from certification can fall within ADA preemption)