On June 26, 2020, the Supreme Court of Texas held, in Texas Mutual Insurance Co. v. PHI Air Medical, LLC, that the Texas Workers’ Compensation Act “fair and reasonable reimbursement” standard—which governs workers compensation reimbursement of air ambulance fees—was not preempted by the federal Airline Deregulation Act (ADA).
The court ruled that the “fair and reasonable” reimbursement standard—which applies generally to any service provider when the Division of Workers’ Compensation has not adopted a specific reimbursement guideline—did not have the forbidden significant effect of specifically regulating air ambulance fares. The court also found that if Texas’ standard was preempted, air ambulance carriers could not obtain full reimbursement—or any reimbursement at all—because the ADA would then override all state reimbursement laws as applied to air ambulance services, including the requirement that insurers provide reimbursement.
In its decision, the court notably distinguished this case from prior federal decisions that have found ADA preemption of state workers compensation laws regarding reimbursement for air ambulance services. The court reasoned that in Texas the standard that is generally applicable is “fair and reasonable” reimbursement, whereas in the other decisions that found ADA preemption, the state laws expressly referenced air ambulance prices or established a maximum fee cap, which is prohibited by the ADA.
Further, because the court found there was no preemption by the federal ADA, it noted that it was unnecessary to consider whether the McCarran-Ferguson Act applied to reverse such a preemption. With this holding, the court reversed an appellate decision which held that Texas’ reimbursement standard was preempted by the ADA, and that McCarran-Ferguson did not reverse-preempt.
NCCI will monitor for further developments.
For more information on other cases monitored by NCCI’s Legal Division, visit previous Court Case Updates and
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