O P I N I O NThis 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 BackgroundIn 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 (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 ofthe Act, which (1) requires the Commissioner ofWorkers’ 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 services[1] 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. See id. § 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 Workplace 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, 134 S. Ct. 1422, 1430 (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 added), is “much more broadly worded” than other legislation that expressly applies only to “a law or regulation”); Morales, 504 U.S. at 383-84 (ADA’s provision “express[es] a broad pre-emptive purpose”); Cox, 868 F.3d at 899 (quoting from Morales’ s discussion of provision’s broad purpose, 504 U.S. at 383-84); Valley Med Flight, Inc. v. Dwelle, 171 F. Supp. 3d 930, 940 (D.N.D. 2016) (“The phrase ‘related to’ in the ADA preemption clause has been construed very broadly.”); Bailey v. Rocky Mountain Holdings, LLC, 136 F. Supp. 3d 1376, 1380 (S.D. Fla. 2015) (observing that Supreme Court has “held that the [preemption] provision should be construed broadly and [has] described its purposeful ‘sweeping nature’” (quoting Morales, 504 U.S. at 384-85)). We agree. The relevant statutes and rules set the rates that can be recovered by PHI, as an air carrier, for transporting patients. Under the plain language of the ADA preemption provision, the ADA preempts those statutes and rules as far as they attempt to regulate PHI’s rates.[8] See, e.g., Cox, 868 F.3d at 904; Cheatham, 2017 WL 4765966, at *6-8; Dwelle, 171 F. Supp. 3d at 941-43; Benton, 581 F. Supp. 2d at 736-39. Does the McCarran-Ferguson Act “reverse-preempt” the Act?We next ask whether the McCarran-Ferguson Act removes the Act from ADA preemption or “reverse-preempts” it. The McCarran-Ferguson Act provides: State regulation The business of insurance, and every person engaged therein, shall be subject to the laws of the several States which relate to the regulation or taxation of such business. Federal regulation No 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: Provided, That . . . the Sherman Act, and . . . the Clayton Act, and . . . the Federal Trade Commission Act, . . . shall be applicable to the business of insurance to the extent that such business is not regulated by State law.15 U.S.C. § 1012.[9] The question we must answer is whether the relevant provisions of the Act and its associated rules were enacted “for the purpose of regulating the business of insurance.”[10] See id.In this inquiry, we are guided by the United States Supreme Court and federal courts that have explained what is meant by that language.As explained by the Supreme Court, the focus of the McCarran-Ferguson Act is on “the relationship between the insurance company and its policyholders.” U.S. Dep’t of Treasury v. Fabe, 508 U.S. 491, 500 (1993). In other words, a statute that regulates the business of insurance is one that is aimed at protecting or regulating the relationship between the insurer and the insured. Id. (quoting Securities & Exch. Comm’n v. National Sees., Inc., 393 U.S. 453, 460 (1969)); see also Group Life & Health Ins. Co. v. Royal Drug Co., 440 U.S. 205, 220-21 (1979) (“References to the meaning of the ‘business of insurance’ in the legislative history of the McCarran-Ferguson Act strongly suggest that Congress understood the business of insurance to be the underwriting and spreading of risk.”). A statute need not directly regulate “the business of insurance,” such as by mandating certain terms of an insurance contract or setting premiums that may be charged by an insurer, to fall within the ambit of the McCarran-Ferguson Act. Fabe, 508 U.S. at 502-03. “The broad category of laws enacted ‘for the purpose of regulating the business of insurance’ consists of laws that possess the ‘end, intention, or aim’ of adjusting, managing, or controlling the business of insurance.” Id. at 505 (quoting Black’s Law Dictionary 1236, 1286 (6th ed. 1990)).“Cases interpreting the scope of the McCarran-Ferguson Act have identified three criteria relevant to determining whether a particular practice falls within that Act’s reference to the ‘business of insurance’: ‘first, whether the practice has the effect of transferring or spreading a policyholder’s risk; second, whether the practice is an integral part of the policy relationship between the insurer and the insured; and third, whether the practice is limited to entities within the insurance industry.’” Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 743 (1985) (quoting Union Labor Life Ins. Co. v. Pireno, 458 U.S. 119, 129 (1982)).[11] A statute must do more than affect insurance companies—it must focus “on the relationship between the insurance company and the policyholder.” See National Secs., 393 U.S. at 460 (holding that statute focused on insurance company stockholders, not on “attempting to secure the interests of those purchasing insurance policies,” and so fell outside McCarran-Ferguson Act); see also Kentucky Ass’n of Health Plans, Inc. v. Miller, 538 U.S. 329, 337-39 (2003) (noting in discussion of broader ERISA reverse-preemption that McCarran-Ferguson Act applies if law was enacted for purpose of regulating business of insurance, not simply if it affects insurance company’s business). In determining whether the statutes and rules at issue should be considered laws enacted for the purpose of regulating the business of insurance, we consider how they fit within the overall framework of the Act. See Fredricksburg Care Co., L.P. v. Perez, 461 S.W.3d 513, 520 (Tex. 2015).In Fabe, the Court determined that an Ohio statute that established the priority in which an insurance company’s assets are distributed upon bankruptcy, placing governmental claims behind policyholders’s claims and those of certain other creditors, fell within McCarran-Ferguson because it was “designed to carry out the enforcement of insurance contracts by ensuring the payment of policyholders’ claims despite the insurance company’s intervening bankruptcy,” and thus its purpose was “identical to the primary purpose of the insurance company itself: the payment of claims made against policies.” 508 U.S. at 504-06. In Royal Drug, the agreements at issue limited the prices participating pharmacies would be paid for drugs, thus minimizing the insurance company’s costs and maximizing its profits, and as the Supreme Court observed, such agreements “may well be sound business practice, and may well inure ultimately to the benefit of policyholders in the form of lower premiums, but they are not the ‘business of insurance.’” 440 U.S. at 214. Further, those agreements were not between the insurance company and its insureds but between the insurer and pharmacies providing services to the insureds. Id. at 216. And finally, in Pireno, a chiropractor attacked an insurance company’s use of peer-review committees to determine whether the chiropractor’s charges were reasonable charges for necessary care. 458 U.S. at 122-23. The Court observed that the use of the peer-review committee did not spread or underwrite a policyholder’s risk, was “distinct from [the insurer's] contracts with its policyholders,” and was “not limited to entities within the insurance industry” because it involved “third parties wholly outside the insurance industry—namely, practicing chiropractors.” Id. at 130-32.“The purpose of the Texas Workers’ Compensation Act is to provide employees with certainty that their medical bills and lost wages will be covered if they are injured.” HCBeck, Ltd. v. Rice, 284 S.W.3d 349, 350 (Tex. 2009); see Tex. Lab. Code § 402.021 (goals of workers’ compensation system are that each employee be treated with dignity and respect and that each injured employee have access to fair and accessible dispute resolution process, prompt and high- quality medical care, and services necessary to facilitate his return to employment; in implementing goals, system must promote safe and healthy workplaces and provide income and medical benefits in timely and cost-effective manner).[12] Employees benefit under the Act because they are saved the time and expense of bringing a common-law tort claim, and subscribing employers benefit because they are not subject to tort claims for job-related injuries. HCBeck, 284 S.W.3d at 350.The specific statutes and rules at issue in this case attempt to limit the rates an air ambulance company may be reimbursed after transporting a workers’ compensation claimant for medical care, which is part of the Act’s goal to provide cost-effective medical care. And although the Act as a whole certainly relates to the insurance industry and contains provisions that may implicate the relationship between insurers and their insureds, the overall goals of the Act and these particular provisions are not specifically directed at the insurance industry, see Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 50 (1987), or the relationship between the Insurers and their policyholders, see Fabe, 508 U.S. at 501. Instead, the overarching focus of the Act is on ensuring prompt medical care for injured workers without those workers having to resort to the legal system, not on the relationship between the Insurers and their policyholders.As in Royal Drug, an injured employee’s paramount concern is not payment arrangements or limits on the reimbursement due to an air ambulance for transporting him after an injury but instead that he obtains prompt and high-quality air-ambulance services if they are required. See 440 U.S. at 213-14. Further, PHI is not “within the insurance entity” and instead is a health-care provider that deals with insurance companies to seek reimbursement for its services. See Pireno, 458 U.S. at 130-32. The caps on air ambulance fees do not affect the relationship between the Insurers and subscribing employers or their injured employees. See Royal Drug, 440 U.S. at 215-16. Nor do they act to underwrite or spread risks among the insureds—like the provisions at issue in Royal Drug, they serve to minimize the Insurers’ costs and maximize their profits. See id. at 214-15. Such cost savings may have an effect on the workers’ compensation system overall, but that effect is attenuated enough that we cannot consider limits on the rates an air ambulance may charge for transporting an injured employee to be “regulating the business of insurance.” See id.“Insurance companies may do many things which are subject to paramount federal regulation; only when they are engaged in the ‘business of insurance’ does the McCarran-Ferguson Act apply.” National Secs., 393 U.S. at 459-60. The statutes and rules in question here do not underwrite or spread policyholder risk and are not specifically directed at the “business of insurance” (as opposed to “the business ofinsurance companies”), but instead minimize the Insurers’ costs, and thus are not subject to reverse preemption under the McCarran-Ferguson Act.[13] See Cox, 868 F.3d at 904-05 (stating that even if Wyoming workers’ compensation system “establishe[d] a type of insurance,” statute and schedule-setting fees for air-ambulance services were not laws “regulating the business of insurance”); see also Life Partners, Inc. v. Morrison, 484 F.3d 284, 294 (4th Cir. 2007) (“The ‘business of insurance’ refers to the marketing, selling, entering into, managing, servicing, and performing of insurance contracts.”); Dwelle, 171 F. Supp. 3d at 944 (statute that effectively capped rate for air-ambulance services did not regulate insurance carriers or performance of insurance contracts, alter or affect policies between insureds and insurers, or limit itself to entities in insurance industry); Perez, 461 S.W.3d at 522 (citing Fabe and National Securities and explaining that practices falling within McCarran-Ferguson Act include fixing rates, selling and advertising policies, licensing of insurance companies and agents, writing of insurance contracts and actual performance of contracts).We hold that the statutes and rules that attempt to regulate the reimbursement that may be obtained by PHI (1) are preempted by the ADA’s prohibition on state attempts to regulate an air carrier’s price, route or service and (2) are not “reverse-preempted” by the McCarran-Ferguson Act. We limit our decision to the rules and statutes related to reimbursement rates and explicitly do not address the balance-billing provision, as PHI has explained that it only attacks that provision in the alternative and that it would prefer to leave the balance-billing prohibition intact.ConclusionBecause we conclude that the provisions related to the reimbursement due to air- ambulance service providers under the Act are preempted by the federal ADA and are not subject to reverse-preemption under the McCarran-Ferguson Act, we reverse the trial court’s judgment and remand the cause to the trial court for further proceedings.[14]David Puryear, JusticeBefore Justices Puryear, Field, and Bourland Reversed and Remanded Filed: January 31, 2018
