Matt Baumgartner wins first-impression lawsuit limiting excessive air ambulance fees

Air Ambulance

Travis County District Judge Stephen Yelenosky has ruled in favor of GDHM client Texas Mutual Insurance Company that the State of Texas can regulate fees paid to air ambulances for transporting patients covered by workers’ compensation insurance.

This case is the first in the recent national wave of litigation to hold that the federal Airline Deregulation Act of 1978 does not invalidate state workers’ compensation fees. Like many air ambulances around the country, PHI Air Medical, LLC was seeking a court order that the Airline Deregulation Act preempts state laws limiting the amount insurers pay for transports of injured workers covered by workers’ compensation insurance. The air ambulances argue that the Airline Deregulation Act requires insurers to pay the air ambulances’ full billed charges. Judge Yelenosky sided with Texas Mutual and the Texas Department of Insurance, Division of Workers’ Compensation, upholding the State’s workers’ compensation reimbursement rate, at 125 percent of the Medicare-approved fee.

Judge Yelenosky noted that the McCarran-Ferguson Act, which Congress passed in 1945 to protect the states’ ability to regulate insurance, preclude preemption of the State’s workers’ compensation insurance fee laws. Moreover, applying the Airline Deregulation Act to preempt state laws setting the fees air ambulances collect would be a fundamental misapplication of that law. The Airline Deregulation Act was intended to eliminate rate regulation of commercial passenger airlines, whose customers can price shop in competitive markets. Air ambulance patients cannot price shop, and there is not a traditional competitive market. In passing the Airline Deregulation Act in 1978, Congress certainly did not intend to eliminate state authority to set reasonable workers’ compensation fees for air ambulances.

Important air ambulance fee dispute litigation is pending in federal and state courts around the country, and it is critical to assert the right arguments against purported Airline Deregulation Act preemption, and payment of air ambulances’ full billed charges. If you have any questions concerning air ambulance fees, or would like to know more about GDHM’s experience in this area, please contact Matt Baumgartner at mbaumgartner@gdhm.com or 512-480-5603.

Air ambulance price gouging has also been the subject of news stories in recent years. The New York Times (additional article here), The Atlantic, and ABC News’ Frontline have both covered the issues, as well as local news outlets including KVUE’s Defenders Investigation series. For more information, view Law360 article.