Valley Med Flight, Inc. v. Dwelle
171 F. Supp. 3d 930
D.N.D.2016Background
- Valley Med Flight, an FAA Part 135 / DOT Part 298 on-demand air ambulance carrier, sued North Dakota officials after HB 1255 and WSI fee rules were applied to air ambulance operations. Plaintiff seeks declaratory and injunctive relief that the state laws are preempted.
- HB 1255 (codified at N.D.C.C. § 23-27-04.10) requires the State Health Department to publish primary/secondary air-ambulance call lists; to qualify for the primary list a provider must be a participating provider with health insurers holding 75% market share (effectively requiring participation with BCBS, the dominant insurer); primary-list providers receive dispatch priority; HB 1255 also requires disclosure of fee schedules on request.
- WSI (North Dakota Workforce Safety & Insurance) enforces a workers’ compensation fee schedule (N.D.C.C. § 65-02-08 and N.D.A.C. § 92-01-02-45.1(22)) that caps payment rates for air ambulance services and prohibits balance billing for injured workers; Valley Med’s billed rates exceed WSI schedule rates and WSI has paid only the schedule amounts.
- Valley Med contends both sets of state rules are preempted by the Airline Deregulation Act (ADA) because they "relate to" an air carrier’s prices, routes, or services; the State argues the rules regulate public health and workers’ compensation and (for WSI provisions) are saved by the McCarran-Ferguson Act as regulation of the business of insurance.
- Procedural posture: Motion for judgment on the pleadings under Fed. R. Civ. P. 12(c); court accepts complaint facts as true and must decide legal preemption issues.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether N.D.C.C. § 23-27-04.10 (HB 1255) is preempted by the ADA | Section 23-27-04.10 regulates providers’ prices and services by forcing participation with major insurers and granting primary dispatch priority, thus it "relates to" prices/routes/services and is preempted | Statute regulates public health/dispatch protocol and is not related to prices/routes/services of air carriers | Court: Preempted by ADA; statute affects prices and services and interferes with market choices |
| Whether N.D.C.C. § 65-02-08 and N.D.A.C. § 92-01-02-45.1(22) (WSI fee schedule / no balance billing) are preempted by the ADA | WSI fee rules directly fix reimbursement rates and prohibit balance billing, thus they "relate to" prices and services and are preempted | Rules are part of workers’ compensation administration and (per State) regulate insurance business such that McCarran-Ferguson saves them | Court: Preempted by ADA; provisions directly affect prices/services and are not saved by McCarran-Ferguson |
| Whether McCarran-Ferguson Act saves HB 1255 by reverse preemption (i.e., was HB 1255 enacted to regulate the business of insurance) | State: HB 1255 protects insured patients and therefore was enacted to regulate insurance-related matters | Valley Med: HB 1255 regulates provider behavior/pricing and dispatch, not insurer–policyholder relations | Court: HB 1255 was not enacted to regulate the business of insurance; McCarran-Ferguson does not save it |
| Whether McCarran-Ferguson Act saves WSI fee rules as regulation of insurance | State: Title 65 and WSI rules regulate workers’ compensation insurance so McCarran-Ferguson applies | Valley Med: WSI is a public workers’ compensation program, not private insurance; rules regulate employer–employee compensation relationship, not insurer–policyholder relations | Court: WSI and related rules are not regulation of the business of insurance; McCarran-Ferguson does not apply |
Key Cases Cited
- Morales v. Trans World Airlines, 504 U.S. 374 (1992) (ADA preemption clause bars state laws "related to" airline rates, routes, or services)
- Am. Airlines, Inc. v. Wolens, 513 U.S. 219 (1995) (ADA preempts state consumer-protection claims that regulate airline marketing; private contract claims not preempted)
- Northwest, Inc. v. Ginsberg, 572 U.S. 273 (2014) (state common-law claims that affect access to frequent-flier benefits can be preempted by ADA based on effect, not form)
- Hillsborough County v. Automated Med. Labs., 471 U.S. 707 (1985) (Supremacy Clause and preemption principles)
- Union Labor Life Ins. Co. v. Pireno, 458 U.S. 119 (1982) (three-part test for what constitutes regulation of the "business of insurance")
- United States Dep’t of Treasury v. Fabe, 508 U.S. 491 (1993) (McCarran-Ferguson Act protects state laws enacted to regulate the business of insurance)
- Botz v. Omni Air Int’l, 286 F.3d 488 (8th Cir. 2002) (broad construction of "related to" language in airline preemption analysis)
- Air Transp. Ass’n of Am. v. Cuomo, 520 F.3d 218 (2d Cir. 2008) (state passenger-protection rules relating to ground-delay accommodations were preempted under ADA)