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Flewelling: Airline Deregulation Act Pre-empts Air Ambulance Fee Schedule

By Harvey Flewelling

Thursday, October 26, 2017 | 508 | 0 | min read

In the recent case of EagleMed LLC v. Cox, 868 F.3d 893 (10th Cir. 2017), the 10th Circuit Court of Appeals affirmed a U.S. District Court decision that a Wyoming statute and associated regulations setting forth a fee schedule for air-ambulance services in workers’ compensation claims are pre-empted by the federal Airline Deregulation Act (ADA).

However, the 10th Circuit reversed the District Court’s order that Wyoming’s Department of Workforce Services must pay in full any amount charged by an air-ambulance provider that transported a covered injured worker. In so holding, the 10th Circuit left the question of whether and, if so, how such services will be paid, up in the air.

The plaintiffs in EagleMed were air-ambulance service providers that operate in Wyoming and throughout the United States. They delivered emergency air transportation for critically ill or severely injured patients to the closest appropriate hospital when requested by first responders or third-party medical professionals.

The plaintiffs employed paramedics and nurses to treat patients during transportation. They held operating certificates issued by the Federal Aviation Administration and were licensed by the state of Wyoming.

Pursuant to Wyoming Statute § 27-14-401(e), the Department of Workforce Services adopted a fee schedule that lists the maximum allowable reimbursement rates for air ambulances. Wyoming law also prohibits providers of injury-related services from billing injured workers.

Plaintiffs submitted bills for payment to the department for a much higher amount than the regulatory rate. The department responded to these bills by paying only the regulatory rate. From September 2012 to August 2015, the department denied payment for the portion of the bills by plaintiffs that exceeded the fee schedule by more than $1.7 million.

Plaintiffs filed a lawsuit in U.S. District Court against the department and several of its officials. They sought a declaration that Wyoming’s workers’ compensation statute and related regulations setting rates for air-ambulance services are pre-empted by ADA, 49 U.S.C. §§ 1371 et seq. 

Under the ADA, states cannot enact or enforce laws related to the price, route or service of an air carrier. Plaintiffs requested a permanent injunction preventing defendants from enforcing the statute and regulations, and from promulgating any future regulations related to air carrier rates.

The District Court judge held that the Wyoming statute and rules are pre-empted by the ADA to the extent they set the maximum rate that air ambulances can charge for their services. The judge’s order permanently enjoined the state officials from enforcing the statute and fee schedule against air-ambulance services and required the department in the future to reimburse all air-ambulance services for the full amount charged.

The 10th Circuit agreed with the District Court that the Wyoming statute and associated rate schedule for ambulance services are pre-empted by the ADA to the extent that they set maximum reimbursement rates for air-ambulance services provided to injured workers covered by Wyoming workers’ compensation law.

However, the 10th Circuit concluded that the District Court abused its discretion insofar as it required the department to pay in full any amount charged by an air-ambulance provider that transported a covered injured worker.

The 10th Circuit noted that, in fashioning injunctive relief against a state agency or official, a district court must ensure that the relief ordered is no broader than necessary to remedy the federal violation.

Enjoining defendants from enforcing the pre-empted statute and fee schedule was sufficient to remedy the federal violation. Placing an affirmative duty to reimburse in full all air-ambulance claims was going too far.

Federal law establishes no duty for states to pay the air-ambulance claims of injured workers who are covered by state workers’ compensation statutes, no matter what rates are charged. The 10th Circuit observed that unfortunate consequences may arise due to the “ill-conceived” intersection of the ADA’s broad pre-emption provision with states' attempts to administer financially sound workers’ compensation programs in the face of skyrocketing air-ambulance bills, but left it for the department officials to determine, as a matter of state law, how Wyoming should administer its workers' compensation program within the limitations set by federal law.

Harvey Flewelling is associate general counsel and appeals counsel for Pinnacol Assurance in Colorado. This post from the American Association of State Compensation Insurance Funds newsletter is republished with permission. 

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