PHI Air Med., LLC v. Tex. Mut. Ins. Co.

• Decision Date: 31 January 2018
• Docket Number: NO. 03-17-00081-CV,03-17-00081-CV
• Citation: 549 S.W.3d 804
• Parties: PHI AIR MEDICAL, LLC, Appellant v. TEXAS MUTUAL INSURANCE COMPANY; Hartford Underwriters Insurance Company ; TASB Risk Management Fund; Transportation Insurance Company; Truck Insurance Exchange; Twin City Fire Insurance Company; Valley Forge Insurance Company; Zenith Insurance Company; and Texas Department of Insurance, Division of Workers’ Compensation, Appellees
• Court: Texas Court of Appeals

549 S.W.3d 804

PHI AIR MEDICAL, LLC, Appellant

v.TEXAS MUTUAL INSURANCE COMPANY; Hartford Underwriters Insurance Company ; TASB Risk Management Fund; Transportation Insurance Company; Truck Insurance Exchange; Twin City Fire Insurance Company; Valley Forge Insurance Company; Zenith Insurance Company; and Texas Department of Insurance, Division of Workers’ Compensation, Appellees

NO. 03-17-00081-CV

Court of Appeals of Texas, Austin.

Filed: January 31, 2018

Mr. Matthew Baumgartner, Graves, Dougherty, Hearon & Moody, 401 Congress Avenue, Suite 2200, Austin, TX 78701, Ms. Lisa A. Bennett, Office of the Attorney General of Texas, P. O. Box 12548, Austin, TX 78711-2548, Ms. Mary Barrow Nichols, Texas Mutual Insurance Company, 6210 East Highway 290, Austin, TX 78723, Mr. James M. Loughlin, Stone, Loughlin & Swanson, LLP, P. O. Box 30111, Austin, TX 78755, Mr. Bryan W. Jones, Texas Mutual Insurance Company, 6210 East Highway 290, Austin, TX 78723, Mr. P. M. Schenkkan, Hearon & Moody, P.C., 401 Congress Avenue, Suite 2200, Austin, TX 78701, for Appellees.

Ms. Gina McCauley, Office of Injured Employees Counsel, General Counsel, 7551 Metro Center Drive, Suite 100, Austin, TX 78744, for Amicus Curiae.

Ms. Amy L. Saberian, Enoch Kever PLLC, 600 Congress Avenue, Suite 2800, Austin, TX 78701, Mr. Craig T. Enoch, Enoch Kever PLLC, BridgePoint Plaza, 5918 W. Courtyard Dr., Suite 500, Austin, TX 78730, Ms. Shelby Leigh O’Brien, Enoch Kever PLLC, BridgePoint Plaza, 5918 W. Courtyard Dr., Suite 500, Austin, TX 78730, for Appellant.

Before Justices Puryear, Field, and Bourland

OPINION

David Puryear, Justice

This case arises out of a dispute over what reimbursement is due to appellant PHI Air Medical, LLC for its transporting of injured employees covered by workers' compensation insurance in Texas. The parties sought judicial review of a decision by the State Office of Administrative Hearings, and the trial court rendered a final judgment in favor of the appellee insurers—Texas Mutual Insurance Company, Hartford Underwriters Insurance Company, TASB Risk Management Fund, Transportation Insurance Company, Truck Insurance Exchange, Twin City Fire Insurance Company, Valley Forge Insurance Company, and Zenith Insurance Company (collectively "the Insurers"). Because we conclude that certain provisions related to rates that can be paid for air ambulance transports are preempted by the Airline Deregulation Act ("the ADA"), we reverse the trial court’s judgment and remand the cause to the trial court for further proceedings.

Statutory and Procedural Background

In 1978, Congress enacted the ADA to encourage market competition, to advance efficiency and innovation, to lower prices, and to increase the variety and quality of air transportation services. Morales v. Trans World Airlines, Inc. , 504 U.S. 374, 378, 112 S.Ct. 2031, 119 L.Ed.2d 157 (1992) ; see 49 U.S.C. § 40101(a) (explaining policy considerations involved in deregulation). The ADA provides:

(b) Preemption. Except as provided in this subsection, 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.

49 U.S.C. § 41713(b).

At the state level, under the Texas Workers' Compensation Act ("the Act"), see Tex. Lab. Code §§ 401.001 - 419.007, employers may elect to self-insure or to obtain private insurance coverage to cover on-the-job injuries to their employees, id. §§ 406.002(a), .003. Under the Act, workers' compensation insurance generally pays benefits to an employee injured on the job regardless of fault or negligence, and the employee waives the right to sue for her injuries. Id. §§ 406.031, .034. This case involves the following statutes and rules:

• section 413.011 of the Act, which (1) requires the Commissioner of Workers' Compensation to adopt policies and guidelines "that reflect standardized reimbursement structures found in other health care delivery systems" by using Medicare and Medicaid reimbursement methodologies and policies and by developing appropriate conversion and other adjustment factors, and (2) states that the guidelines "must be fair and reasonable and designed to ensure the quality of medical care and to achieve effective medical cost control," id. § 413.001;

• provisions governing the assessment of administrative penalties and sanctions for violations of the Act, id. §§ 415.021-.036;

• the administrative rule defining "maximum allowable reimbursement" ("MAR") that may be paid to a health-care provider and stating that certain health-care services shall be reimbursed in accordance with the Workers' Compensation Division’s fee guidelines, a negotiated contract, or if neither applies, "a fair and reasonable reimbursement rate" consistent with section 413.011 of the Act, 28 Tex. Admin. Code § 134.1(e), (f) (Tex. Dep't of Ins., Medical Reimbursement); and

• the rule explaining that the MAR for certain coded services¹ shall be 125 percent of a particular Medicare fee schedule, 125 percent of the published Texas Medicaid fee schedule rate for that code if it is not included in the Medicare schedule, or, if neither applies, the "fair and reasonable" rate under section 134.1, as summarized above, id. § 134.203(d), (f) (Tex. Dep't of Ins., Medical Fee Guideline for Professional Services).²

PHI provides air-ambulance services throughout Texas and elsewhere in the country. It is certified and regulated by the United States Department of Transportation pursuant to the Federal Aviation Act. When it is called upon to transport someone, it charges for that service by billing a "per-trip charge" and an additional charge for the miles transported. PHI and the Insurers disagreed on the amount that PHI could recover for its transport of injured workers covered by workers' compensation policies issued by the Insurers, and the issue was brought before the Division, as required by the Act. See Tex. Lab. Code § 413.031. The Division determined that the applicable provisions of the labor code and related rules were preempted by the ADA, and the Insurers appealed, requesting a de novo hearing at the State Office of Administrative Hearings. An Administrative Law Judge heard the matter and issued a final decision finding (1) that the federal ADA did not preempt the Act and (2) that PHI should recover 149% of the Medicare rate for such services. The Insurers and PHI sought judicial review, and the Division intervened. Following a hearing, the trial court signed a final order declaring that the ADA did not preempt the Act and that the Insurers could not be asked to pay more than 125% of the Medicare amount. PHI appealed.

Does the ADA apply to preempt the Act?

Our initial inquiry is whether the ADA preempts the Act, first addressing the Insurers' argument that PHI’s services do not fall within the preemption provision. The preemption provision bars a state from enacting a law or rule "related to a price, route, or service of an air carrier that may provide air transportation under this subpart." 49 U.S.C. § 41713(b-1).³ The Insurers argue that PHI does not "provide air transportation" subject to preemption because it does not hold certificates under the specified subpart, Subpart II.⁴

Under Subpart II, "[e]xcept as provided in this chapter or another law," an air carrier "may provide air transportation only if the air carrier holds a certificate under this chapter." Id. § 41101(a). However, the Secretary of Transportation has the authority to exempt certain classes of carriers if he considers it necessary and "decides that the exemption is consistent with the public interest." Id. § 40109(c). As applicable here, the Secretary of Transportation has established "a classification of air carrier, designated as ‘air taxi operators,’ which directly engage in the air transportation of persons" but which "[d]o not hold a certificate of public convenience and necessity and do not engage in scheduled passenger operations." 14 C.F.R. § 298.3(a). We conclude that an air-ambulance service, as an air taxi operator, is an air carrier that may provide air transportation under Subpart II, 49 U.S.C. § 41101(a), while exempted from certain certification requirements, id. § 40109(c). We further conclude that the preemption provision applies to such carriers. Seeid. § 41713(b);⁵ see, e.g. , Air Evac EMS, Inc. v. Cheatham , No. 2:16-CV-05224, 2017 WL 4765966, at *5 (S.D.W. Va. Oct. 20, 2017) (appeal filed Nov. 22, 2017) (noting that no other courts have ruled that air ambulances were not air carriers under ADA, observing that Department of Transportation licensed Air Evac as an air carrier, and holding "that Air Evac’s practice of providing emergency air ambulance services indiscriminately when called upon by third party professionals, together with its certification as an air carrier by the DOT and court cases affirming this status, qualify Air Evac as an air carrier under the ADA"); EagleMed, LLC v. Wyoming ex rel. Dep't of Workforce Servs. , 227 F.Supp.3d 1255, 1277-78 (D. Wyo. 2016), aff'd in part, rev'd in part by EagleMed LLC v. Cox , 868 F.3d 893, 904 (10th Cir. 2017) (finding that air ambulances are "air carriers" under ADA); Med-Trans Corp. v. Benton , 581 F.Supp.2d 721, 732-33 (E.D.N.C. 2008) (holding that air ambulance service provider was common carrier subject to preemption provision).⁶ Therefore, PHI, as a registered air taxi with all relevant and required certificates, is an air carrier under Subpart II.⁷ We now turn to whether the provisions at issue are preempted.

Other courts that have considered the preemptive effect of the ADA have noted the breadth of the language chosen by Congress. See, e.g. , Northwest, Inc. v. Ginsberg , 572 U.S. 273, 134 S.Ct. 1422, 1430, 188 L.Ed.2d 538 (2014) (noting that language of ADA’s preemption provision, which applies to "a law, regulation or other provision having the force and effect of law" (emphasis...