AIR EVAC EMS, INCORPORATED v. KENT SULLIVAN, in his Official Capacity as Texas Commissioner of Insurance; CASSIE BROWN, in her Official Capacity as Texas Commissioner of Workers’ Compensation
No. 18-50722
United States Court of Appeals for the Fifth Circuit
August 4, 2021
Lyle W. Cayce Clerk
AIR EVAC EMS, INCORPORATED, Plaintiff-Appellee,
versus
KENT SULLIVAN, in his Official Capacity as Texas Commissioner of Insurance; CASSIE BROWN, in her Official Capacity as Texas Commissioner of Workers’ Compensation, Defendants-Appellants,
versus
TEXAS MUTUAL INSURANCE COMPANY; LIBERTY MUTUAL INSURANCE COMPANY; ZENITH INSURANCE COMPANY; HARTFORD UNDERWRITERS INSURANCE COMPANY; TWIN CITY FIRE INSURANCE COMPANY; TRANSPORTATION INSURANCE COMPANY; VALLEY FORGE INSURANCE COMPANY; TRUCK INSURANCE EXCHANGE, Intervenors-Appellants.
Appeal from the United States District Court for the Western District of Texas USDC No. 1:16-CV-60
Before STEWART, CLEMENT, and HO, Circuit Judges.
Air Evac EMS, Inc., is an air ambulance provider that offers medical transport services to a wide variety of patients. That includes patients who are injured at their workplace. The price that Air Evac may charge for such transportation is accordingly subject to conflicting regulatory regimes.
The Texas Workers’ Compensation Act (“TWCA“),
The price restrictions are not saved by the McCarran-Ferguson Act. That act makes clear that “[n]o Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance, or which imposes a fee or tax upon such business, unless such Act specifically relates to the business of insurance.”
We accordingly affirm. In doing so, we agree with our sister courts of appeals, which have unanimously held that the ADA preempts state price caps on air ambulance reimbursements, and that those state price caps are not saved by the McCarran-Ferguson Act. And we disagree with the Texas Supreme Court, which has reached contrary conclusions by a divided vote.
I.
Under the TWCA, employees in Texas receive guaranteed medical care paid for by employer-funded insurance policies, in exchange for relinquishing their common-law workplace injury claims. As part of this regulatory scheme, the TWCA strictly regulates the prices that private insurers must pay health care providers for treating workers injured on the job. See
Air Evac contends that these price caps are preempted by the ADA. So it sued various Texas state officials, seeking a declaration that the ADA preempts the TWCA and its regulations, and an injunction barring enforcement of the price caps. Alternatively, Air Evac requested an injunction barring enforcement of the TWCA‘s balance-billing prohibition.
Eight insurance companies joined the Texas officials as intervenors to defend Texas law. Together they moved to dismiss the case on various jurisdictional grounds. The district court granted the motion, but we subsequently reversed. See Air Evac EMS, Inc. v. Tex. Dep‘t of Ins., Div. of Workers’ Comp., 851 F.3d 507, 510 (5th Cir. 2017).
On remand, the district court granted Air Evac‘s motion for summary judgment on its claim that the Texas price caps were preempted by the ADA and not saved by
Both the State and the eight insurance companies appealed. Following oral argument in this case, the Supreme Court of Texas decided a similar case addressing the same issues. See Tex. Mut. Ins. Co. v. PHI Air Med., LLC, 610 S.W.3d 839 (Tex. 2020), cert. denied, 141 S. Ct. 2647 (2021) (mem.). Contrary to the district court here and our sister courts of appeals that have examined these issues, the Texas Supreme Court held that the TWCA price caps on air ambulance providers are not preempted by federal law. But it did so over a thorough dissent supported by two members of the court. Id. at 865 (Green, J., joined by Hecht, C.J.). Seven members sided with the majority, but for differing reasons—six concluded that the ADA does not preempt the TWCA price caps, id. at 843, while four concluded that the TWCA price caps are saved by the McCarran-Ferguson Act, id. at 856.
We review summary judgment rulings de novo. IberiaBank v. Broussard, 907 F.3d 826, 842 (5th Cir. 2018).
II.
Congress enacted the ADA in 1978, introducing free-market principles to a heavily regulated and stagnating aviation industry. To streamline regulations, avoid a patchwork of state protocols, and “ensure that the States would not undo federal deregulation with regulation of their own,” Congress included an express preemption provision. Morales v. Trans World Airlines, Inc., 504 U.S. 374, 378 (1992).
Under the express preemption provision, “[a] State[] . . . may not enact or enforce a law, regulation, or other provision having the force and effect of law related to a price, route, or service of an air carrier that may provide air transportation under this subpart.”
Two of our sister circuits have unanimously held that the ADA preempts price controls on air ambulance services set by state workers’ compensation regulations. See Air Evac EMS, Inc. v. Cheatham, 910 F.3d 751 (4th Cir. 2018); EagleMed LLC v. Cox, 868 F.3d 893 (10th Cir. 2017). We agree.
As a threshold matter, Texas and the insurers urge that we adopt a presumption against preemption when it comes to issues of traditional state law such as workers’ compensation. We need not address that contention here, however, because we do not regard this as a close call—the text of the ADA plainly governs this case. See, e.g., Cheatham, 910 F.3d at 762 n.1 (“[W]e need not enter the great preemption presumption wars here because the text of the preemption provision . . . governs the disposition of this case.“).
Under the ADA, a state may not enforce any law or regulation that is (1) “related to a price” of (2) an “air carrier” that (3) may provide air transportation “under this subpart.”
A.
The TWCA regulations in question plainly involve the “price” of air transport services. The ADA defines “price” as “a rate, fare, or charge.”
The TWCA regulations plainly govern “price“—namely, the price that Air Evac is allowed to charge Texas workers’ compensation insurers for air ambulance services.
For their part, Texas and the insurers contend that the term “price” applies only to competitive markets—and that “air ambulances do not operate in a market that would dictate the price or rate charged in the absence of government interference.” Under that view, any amount that is determined by a regulator for a particular good or service would not constitute a “price.” That would make terms like “price controls” an oxymoron. Yet the term is ubiquitous in our law. “Consistent usage, as reflected in numerous judicial opinions, can be an authoritative source of common parlance.” Frederking v. Cincinnati Ins. Co., 929 F.3d 195, 198 (5th Cir. 2019) (citing New Prime Inc. v. Oliveira, 139 S. Ct. 532, 540 (2019)). See, e.g., Yakus v. United States, 321 U.S. 414, 418 (1944) (concerning the constitutionality of the Emergency Price Control Act of January 30, 1942, 56 Stat. 23); United States v. Uni Oil, Inc., 710 F.2d 1078, 1080 (5th Cir. 1983) (concerning federal “price controls” on oil). See also Address to the Nation Outlining a New Economic Policy: “The Challenge of Peace“, PUBLIC PAPERS OF PRESIDENT RICHARD M. NIXON 888 (Aug. 15, 1971) (“I am today ordering a freeze on all prices and wages throughout the United States for a period of 90 days. In addition, I call upon corporations to extend the wage-price freeze to all dividends.“); Exec. Order No. 11,615—Providing for Stabilization of Prices, Rents, Wages, and Salaries, 36 Fed. Reg. 15,727 (Aug. 15, 1971). In response, Texas and the insurers rely on Hodges v. Delta Airlines, Inc., 44 F.3d 334, 336 (5th Cir. 1995) (en banc). But in Hodges we construed the term “service,” not “price,” under the ADA.
In sum, the amount that TWCA rules would allow Air Evac to receive for its air ambulance services falls well within the term “price” under the ADA. Accordingly, those TWCA rules plainly “relate to” price.
As the Supreme Court has observed, the term “related to” under the ADA is broad and indeed “much more broadly worded” than other preemption provisions. Northwest, Inc. v. Ginsberg, 572 U.S. 273, 283 (2014). See also Morales, 504 U.S. at 383–85. A law “relate[s] to” price under the ADA so long as it has a “connection with or reference to” price or presents a “significant effect” on the price of air services. Morales, 504 U.S. at 384, 388. See also Buck v. Am. Airlines, Inc., 476 F.3d 29, 34–35 (1st Cir. 2007) (“[T]he ADA preempts both laws that explicitly refer to an airline‘s prices and those that have a significant effect upon prices.“); Travel All Over the World, Inc. v. Saudi Arabia, 73 F.3d 1423, 1433 (7th Cir. 1996) (declining to find preemption when plaintiffs’ tort claims neither “expressly refer to airline rates, routes, or services,” nor have a “‘forbidden significant [economic] effect’ on airline rates, routes, or services“) (alteration in original).
The TWCA regulations challenged here obviously have a “significant effect” on Air Evac‘s prices—they effectively forbid Air Evac from recovering from workers’ compensation insurers the price that they would otherwise charge for air ambulance services. As we have previously noted, the “TWCA‘s provisions effectively set a reimbursement rate” on air ambulance services by restricting the amount insurers pay them. Air Evac, 851 F.3d at 514. See also PHI Air Med., 610 S.W.3d at 866 (Green, J., dissenting) (“The TWCA‘s reimbursement scheme is related to an air ambulance‘s prices because it indirectly limits the amount than an air carrier may charge for its services.“). As the Fourth Circuit put it, “[i]f such actions involving an air carrier are not ‘related to price,’ it is unclear what meaning the phrase would have left.” Cheatham, 910 F.3d at 767–68.
B.
We likewise have little trouble concluding that Air Evac qualifies as an “air carrier.” The ADA defines an “air carrier” as “a citizen of the United States undertaking by any means, directly or indirectly, to provide air transportation.”
Nevertheless, Texas and the insurers insist that air ambulances are not “air carriers” under the ADA because Congress‘s purpose in enacting the ADA was to cover only commercial, passenger airlines. But we are governed by the text of the statute. See, e.g., Morales, 504 U.S. at 383 (“[W]e . . . begin with the language employed by Congress and the assumption that the ordinary meaning of that language accurately expresses the legislative purpose.“) (quotations and citations omitted). Neither Texas nor the insurers have “presented a single textual reason to support the argument that the broad language of the [ADA]‘s express preemption provision should not include air-ambulance services.” Cox, 868 F.3d at 904.
C.
Finally, air ambulances “provide air transportation under this subpart“—that is, under subpart II of the amended Federal Aviation Act.
* * *
Accordingly, we hold that the ADA expressly preempts TWCA reimbursement regulations as applied to air ambulance services.
III.
The TWCA reimbursement regulations are not saved by the McCarran-Ferguson Act. As relevant here, the McCarran-Ferguson Act shields from federal preemption those state laws that are “enacted . . . for the purpose of regulating the business of insurance,” unless the federal statute “specifically relates to the business of insurance.”
It is undisputed that the ADA does not “specifically relate to” the business of insurance. So the sole issue is whether the TWCA was enacted “for the purpose of regulating the business of insurance“—that is, if it has the “‘end, intention, or aim’ of adjusting, managing, or controlling the business of insurance.” Fabe, 508 U.S. at 505 (quoting BLACK‘S LAW DICTIONARY 1236, 1286 (6th ed. 1990)).
That requires determining whether the challenged provisions of the TWCA regulate “the relationship between the insurance company and the policyholder.” Id. at 501 (quoting SEC v. Nat‘l Sec., Inc., 393 U.S. 453, 460 (1969)). The McCarran-Ferguson Act “assure[s] that the activities of insurance companies in dealing with their policyholders would remain subject to state regulation.” Nat‘l Sec., 393 U.S. at 460 (emphasis added).
The TWCA regulations at issue here deal with the relationship between insurers and providers—namely, the providers of air ambulance services—and not the relationship between insurers and their beneficiaries.
Accordingly, the TWCA regulations are not shielded from federal preemption under the McCarran-Ferguson Act.
A.
In Group Life & Health Insurance Company v. Royal Drug Company, 440 U.S. 205 (1979), the Supreme Court made clear that
The TWCA regulations fail under all three criteria. See, e.g., PHI Air Med., 610 S.W.3d at 876–77 (Green, J., dissenting) (concluding that the TWCA regulations fail under all three factors identified in Royal Drug and Pireno).
To begin with, the TWCA regulations govern the relationship between insurers and providers, not insurers and insureds. So the regulations do not involve the “business of insurance” under the first criteria.
The Court reached precisely the same conclusion under similar facts in Royal Drug. It held that an insurer‘s agreement to reimburse pharmacies for the cost of prescription drugs if the pharmacies offered the drugs to the insurer‘s policyholders for $2 did not involve the “business of insurance.” Id. at 212–14. To conclude otherwise would “confuse the obligations of [the insurer] under its insurance policies“—which involved the insurer-insured relationship—“and the agreements between [the insurer] and the participating pharmacies, which serve only to minimize the costs [the insurer] incurs in fulfilling its underwriting obligations.” Id. at 213. The defining feature of the insurer-insured relationship is the exchange of insurance premiums in order to obtain medical benefits. The particulars of any exchange between insurers and pharmacies are merely ancillary features that are not part of the “business of insurance.” And even though any cost savings might be passed on to policyholders in the form of reduced premiums, individual beneficiaries were “basically unconcerned” with any specific business arrangements between the insurer and the pharmacy, so long as the beneficiaries received the promised benefits. Id. at 214. As the Court put it, McCarran-Ferguson “exempts the ‘business of insurance’ and not the ‘business of insurance companies.‘” Id. at 217. “It is next to impossible to assume that Congress could have thought that agreements (even by insurance companies) which provide for the purchase of goods and services from third parties at a set price are within the meaning of that phrase [i.e. ‘business of insurance‘].” Id. at 230.
By the same logic, the TWCA regulations challenged here likewise do not involve the relationship between the insurer and the insured. As in Royal Drug, the regulations help reduce costs to the workers’ compensation insurance carrier. But employers and employees are “basically unconcerned” with how the insurer structures its payments or how much any single service provider is paid. Id. at 214. After all, the amount the insurer pays the provider is not a benefit to the insured. In sum, the focus of the TWCA regulations is on the relationship between insurer and provider, not insurer and insured.
The TWCA regulations also fail under the two remaining criteria. Reimbursement arrangements between insurers and providers do not meaningfully affect the allocation of risk between insurer and insured. The arrangement may help limit the insurer‘s costs, but it does not substantially affect the transfer of risk from the insured to the insurer. Nor is the subject of the regulations “limited to entities within the insurance industry.” Pireno, 458 U.S. at 129. Air Evac is an air ambulance company, not an insurance company.
B.
For their part, Texas and the insurers contend that the three criteria set forth in Royal Drug and Pireno apply in cases involving the application of certain enumerated federal antitrust statutes, and have only limited applicability to other federal laws like the ADA. See
But nothing in the text of the McCarran-Ferguson Act suggests that we should give the term “business of insurance” a different meaning when it comes to applying the Act to other federal statutes like the ADA. “[W]e ‘cannot imagine that “business of insurance” could have two different meanings in the same statutory subsection.‘” Bailey, 889 F.3d at 1273 n.30 (quoting Blackfeet Nat‘l Bank v. Nelson, 171 F.3d 1237, 1246 n.13 (11th Cir. 1999)).
Accordingly, our court has applied the Royal Drug–Pireno framework to federal statutes other than the enumerated antitrust provisions. See Am. Bankers Ins. Co. of Fla. v. Inman, 436 F.3d 490, 493–94 (5th Cir. 2006); Munich Am. Reinsurance Co. v. Crawford, 141 F.3d 585, 590–91 (5th Cir. 1998).
* * *
We hold that the TWCA regulations concerning the reimbursement of air ambulance providers like Air Evac are preempted by the ADA, and are not saved by the McCarran-Ferguson Act. Accordingly, we affirm.
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