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 v. Phi Air Medical, LLC, 610 S.W.3d 839

Background

PHI Air Medical, a federal-licensed air-ambulance operator, sought full payment of billed charges for 33 worker‑compensation transports in Texas (2010–2013); no contract set price with the insurers for those transports.
Under the Texas Workers’ Compensation Act (TWCA), absent an adopted fee guideline for a service, insurers must reimburse providers up to a “fair and reasonable” amount; Texas also prohibits providers from balance‑billing covered workers.
Historically insurers paid PHI about 125% of the Medicare air‑ambulance rate; PHI filed administrative disputes seeking full billed charges; the Division, an ALJ, and later tribunals produced differing rulings on the proper reimbursement amount.
PHI argued the federal Airline Deregulation Act (ADA) preempted Texas’s reimbursement standard, entitling it to full payment; the Division initially agreed, the ALJ held no preemption and awarded 149% of Medicare, the trial court denied preemption and applied 125%, and the court of appeals reversed finding ADA preemption.
The Texas Supreme Court granted review to decide: (1) whether the ADA preempts Texas’s general fair‑and‑reasonable reimbursement standard as applied to air ambulances; and (2) whether the ADA, if preemptive, requires full payment of billed charges.

Issues

Issue	PHI's Argument	Insurers/State's Argument	Held
Whether the ADA preempts Texas’s general "fair and reasonable" reimbursement standard for workers’ compensation air‑ambulance claims	ADA preempts any state rule that affects air‑carrier prices; the Texas standard limits recovery and thus is preempted	The TWCA standard does not expressly reference air‑carrier prices and does not show a forbidden "significant effect" on fares	No — ADA does not preempt Texas’s general fair‑and‑reasonable reimbursement standard on this record (no demonstrated significant effect on PHI’s prices)
Whether, if preempted, PHI is entitled to full reimbursement of billed charges under state law (severability/remedy)	Preemption of the rate‑setting part of the scheme should leave intact an obligation to pay billed charges under state law	If preempted, federal law supplies no requirement to reimburse; preemption would displace the entire state reimbursement regime, producing no obligation to pay	PHI cannot obtain full reimbursement via ADA preemption; if preemption applied it would eliminate, not convert, state reimbursement obligations (no federal duty to require payment)
Whether the McCarran‑Ferguson Act saves Texas’s scheme from ADA preemption	(PHI) ADA preempts and McCarran‑Ferguson does not save the TWCA provisions	(Insurers/State) McCarran‑Ferguson may reverse‑preempt federal law for state insurance regulation	Court resolved preemption issue and did not decide applicability of McCarran‑Ferguson because ADA preemption was not shown

Key Cases Cited

Morales v. Trans World Airlines, 504 U.S. 374 (1992) (establishes ADA preemption framework and the "related to"/"forbidden significant effect" test)
Rowe v. New Hampshire Motor Transport Ass'n, 552 U.S. 364 (2008) (reaffirms limits on preemption and significant‑effect analysis)
Dan's City Used Cars, Inc. v. Pelkey, 569 U.S. 251 (2013) (preemption cannot be used to rely on state law for authority while simultaneously erasing the state remedies the party invokes)
American Airlines, Inc. v. Wolens, 513 U.S. 219 (1995) (Congress did not intend federal airline law to displace ordinary state contract and remedial disputes between private parties)
Air Evac EMS, Inc. v. Cheatham, 910 F.3d 751 (4th Cir. 2018) (examined fee‑schedule plus no‑balance‑billing regime and found those features dispositive for preemption analysis)
EagleMed LLC v. Cox, 868 F.3d 893 (10th Cir. 2017) (fee caps and balance‑billing prohibitions can establish preemption because they directly set maximum recoveries)
Bailey v. Rocky Mountain Holdings, LLC, 889 F.3d 1259 (11th Cir. 2018) (identified balance‑billing prohibition as the feature producing significant effect on air‑carrier prices)
Hodges v. Delta Airlines, Inc., 44 F.3d 334 (5th Cir. 1995) (laws of general applicability are preempted if they have a forbidden significant effect on rates)