Texas Court Ruling Prevents Price Gouging by Air Ambulance Companies

A state district court judge in Austin has upheld the State of Texas’ right to 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 wipe out state workers’ compensation fee caps. The Airline Deregulation Act was intended to free commercial passenger airlines, whose customers can price shop in competitive markets, from rate regulation. Air ambulance patients cannot price shop. They are not even told what the air ambulance company will charge until after the transport.

PHI Air Medical LLC was seeking court orders that the Airline Deregulation Act “preempts” guidelines set by the Texas Department of Insurance, Division of Workers’ Compensation regarding what insurers pay for transports of injured workers and instead requires insurers to pay its full billed charges. 345th District Court Judge Stephen Yelenosky sided with Texas Mutual, upholding the state’s workers’ compensation reimbursement rate at 125 percent of the Medicare-approved fee. Judge Yelenosky noted that the McCarran-Ferguson Act, passed by Congress in 1945 to protect state rights to regulate the insurance industry, preempts the Airline Deregulation Act as it applies to payment in the workers’ compensation system.

“This is a great first step toward common sense in air ambulance fees,” Mary Nichols, senior vice president and general counsel for Texas Mutual, said. “Air ambulances charge 500 to 700 percent of their costs. These charges are often $40,000 or more versus actual costs of $7,000 or so.”

“This case is important for all consumers because, although the court’s order specifically applies to workers’ compensation patients, more and more people are winding up with financially devastating medical bills from being ‘balance billed’ for emergency air transport,” Nichols said. “We’re very hopeful that this is the beginning of the end of burdening patients with bills totaling tens of thousands of dollars. Texas’ robust workers’ compensation system protects injured employees from this egregious practice, but regular insurance has not been able to similarly shield its own patients. We believe this precedent-setting case will ultimately be of great benefit to the American public.”

Source: Texas Mutual Insurance Company