Thursday, May 17, 2018
I have written a little about air ambulance preemption elsewhere and I won’t pause at length to note some of the inconsistencies I see between Airline Deregulation Act preemption and evolving ERISA preemption analysis. As a thought experiment, though, I invite you to re-read the U.S. Supreme Court’s 1995 Travelers’ opinion, and then to compare it to the Supreme Court’s 1992 air ambulance opinion in Morales v. Trans-World Airlines (in which the Court unabashedly utilized an ERISA preemption analysis, much to the consternation of the then Texas Attorney General). I suspect you will note some tension, and one may not need much persuading that a case in which litigant TWA was already defunct may now be even more long-in-the tooth. Simply put, Morales was pre-Travelers, and that is a problem.
Nonetheless, the federal circuits will continue to muck about in the pre-Travelers ERISA preemption thicket until stopped. One such muck-about case is the 10th Circuit’s EagleMed decision. A good partial summary of the case can be found here, but I will endeavor to give you my own severely truncated birds-eye view followed by reflections on what has been unfolding after preemption was found.
Air ambulance costs have been skyrocketing and a few years ago some air ambulance companies billed the Wyoming workers’ compensation system the market rate for rendering services to Wyoming-eligible injured workers. The state refused to pay those rates and capped reimbursement according to a state schedule. Ultimately the 10th circuit opined that the Wyoming schedule, imposing a maximum charge for air ambulance services, was preempted. So far the story is familiar, but what is seldom asked is what happens after a finding of air ambulance preemption.
In EagleMed, while the federal circuit court upheld the federal district court’s finding of preemption, it reversed the lower court’s conclusion that, because the schedule had been preempted, full reimbursement to the air ambulance companies followed as a matter of course. On this question, the federal circuit court remanded to state workers’ compensation officials because it was not clear what the state was willing to pay in the absence of the preempted schedule. (That, of course, is a state question). The state hearing officials essentially agreed with the federal district court: with the fee schedule gone, the state was required to pay whatever the air ambulance companies chose to charge. The state appealed (Wyoming’s system is monopolistic, so the state is the de facto insurer), and Wyoming’s attorney general has recently filed a brief Download EagleMed - AG's brief, in support of the appeal, with the Wyoming Supreme Court. The attorney general argues that the state legislature would never originally have provided unlimited reimbursement for air ambulance services, for to do so would put the state in the position of writing a blank check. The generic Wyoming ambulance reimbursement language states:
If transportation by ambulance is necessary, the division shall allow a reasonable charge for the ambulance service at a rate not in excess of the rate schedule established by the director under the procedure set forth for payment of medical and hospital care.
Because the air ambulance rates established under authority of this language has been preempted, however, what is the state to do? It cannot establish a maximum rate of reimbursement without suffering preemption. Is the preempted language severable from the rest? “If transportation by ambulance is necessary, the division shall allow a reasonable charge for the ambulance service . . .” It is perhaps not surprising that the air ambulance companies took the position, before the Wyoming workers’ compensation officials, that the fee schedule is separable from the general obligation to pay for ambulance services. Wyoming, on the other hand, takes the position that the reimbursement provision, as it pertains to air ambulance services, is not separable from the fee schedule and that, in effect, the entire provision has been preempted as it applies to air ambulance reimbursement. If Wyoming is wrong, and the provision survives without the fee schedule, there is no limiting boundary (beyond reasonableness?) for reimbursement.
Another wrinkle in the EagleMed remand emerges because one provision of Wyoming law states that medical providers are not permitted to bill injured workers directly for work-related injury costs.
Fees or portions of fees for injury related services or products rendered shall not be billed to or collected from the injured employee.
The Wyoming attorney general argues that, in context, this provision applies only to health care providers and hospitals. The federal courts were not so sure, and I am not convinced given the reference in the ambulance reimbursement provision set out above to “under the procedure set forth for payment of medical and hospital care.” Some linkage is occurring in that language, and I doubt it can be easily de-linked. Resolution of the issue is important because, if the “no bill” provision does not pertain to air ambulance services, the injured worker herself might be directly billed by the air ambulance companies. On this reading, who would pick up the excess—the difference between what a fee schedule might (eventually) provide, and the full costs of air ambulance services? Wyoming concludes that the cost should fall on the injured worker, but that the excess could be made up by employees’ health insurance or air ambulance “Medigap” insurance. But what reason is there to think that an employee’s general health insurance would cover such a loss? Why should it if the expense is clearly work-related? Could such insurance coverage be mandated at the state level? If the employer’s health plan is self-insured, any attempt to mandate air ambulance insurance would be preempted by ERISA. The state could mandate such coverage for all insured health plans under the savings clause to ERISA’s preemption provision; but this is a small monopolistic state with no primary workers’ compensation market. Secondary markets in such an environment might become quite complicated. And, of course, if the coverage became too onerous the employer could simply drop health care coverage altogether. As for a Medigap model, who pays, and what would be the premium?
Although this might strike you as a somewhat exotic problem – how many people, after all, require air ambulances? – the problem is far from abstract in a rural state like Wyoming, where hospitals are few and far between, where fully-accredited trauma centers are non-existent, and where workplaces can be scattered and remote. (As we used to say in South Jersey, “get me over the bridge!). Many serious injuries are treated in neighboring Colorado at hospitals that are often far away. Access to air ambulances could be a matter of life and death for a substantial number of injured workers. Ask yourself whether your state would tolerate any substantial workers’ compensation non-coverage of ambulance costs. Is it credible to say that these are not “medical costs” and therefore may simply be avoided, as the state of Wyoming is arguing?
Here, it seems to me, is the fundamental disconnect. Workers’ compensation—indemnity and medical benefits—is not, like other forms of employee or social welfare benefits, discretionary. It is the quid pro quo for a tort suit. It is a right. The cause of action lies against the employer, whether insurance exists to cover the liability, or it does not. The situation in Wyoming is complicated because the state is the insurer. Regardless, the categorical abrogation of a workers’ compensation benefit (previously assumed to exist) means that a remedy is missing. With respect to that remedy—damages for the cost of air ambulance travel—the employee must be permitted, at a minimum, to pursue relief in tort against the employer, whether the cause of action is likely to be successful or unsuccessful. This is true in any state in which hyperinflated medical expense becomes “uninsurable.” Liability does not disappear because the liable entity becomes insurable. Indeed, in Wyoming, the right to recovery for physical injury is explicitly constitutional, and I would argue that the same is implicitly true in other states under various state constitutional provisions. Section 10(a) of the Wyoming Constitution states: "No law shall be enacted limiting the amount of damages to be recovered for causing the injury or death of any person." It will be most interesting to see what the Wyoming Supreme Court decides.
Michael C. Duff