- Airline Deregulation Act (ADA) preempts class action claims seeking to enforce Florida statute that limits an air ambulance operator's prices by prohibiting balance billing of unpaid invoices.
- McCarran-Ferguson Act does not reverse preempt the ADA because the Florida statute does not regulate the "business of insurance" – the statute affects the billing and pricing practices of medical providers only with respect to insureds, and has nothing to do with the policy relationship between an insurer and an insured.
In a significant decision for the air ambulance industry, the U.S. Court of Appeals for the Eleventh Circuit held that the Airline Deregulation Act (ADA) preempts enforcement of a Florida law limiting an air ambulance operator's ability to collect unpaid amounts on its invoices. The decision, Bailey v. Rocky Mountain Holdings LLC,2 affirms the district court’s dismissal of a proposed class action against the operator.
The ADA, which applies to air ambulance operators, prohibits states from enacting or enforcing laws "related to a price, route or service of an air carrier."3 The Eleventh Circuit panel agreed with the district court that Florida's Personal Injury Protection (PIP) statute4 improperly restricted an air ambulance operator's prices by first limiting the reimbursement for such services to a schedule of charges based on Medicare rates and then prohibiting the operator from billing the insured for the balance of the unpaid invoices.
District Court’s Summary Judgment Holding
The action centered on air ambulance services provided to transport plaintiff's son to a hospital following an automobile accident. Seeking reimbursement, the operator billed the plaintiff's automobile insurer for the air ambulance services. The insurer reimbursed the operator pursuant to the PIP statute, which permitted reimbursement at 80 percent of the statutory fee for air ambulance services up to the policy's limits. The operator sought the unpaid balance from plaintiff, as the insured.
Plaintiff commenced a class action contending that the PIP statute's "balance billing provision" prohibited the operator from attempting to bill for "any amount in excess of such limits, except for amounts not covered by the insured personal injury coverage due the coinsurance amount or maximum policy limits."5 The court disposed of the claim by granting summary judgment to the operator on ADA preemption grounds, finding that the claims "directly challeng[ed]" the operator's prices and "naturally affect[ed]" its services.6
Eleventh Circuit Affirms Preemption Ruling
On appeal, the Eleventh Circuit affirmed and concluded that the action "[fell] squarely within the preemptive intent behind the ADA." The panel found that application of the PIP statute had a "forbidden effect" on the operator's prices because it "prohibit[ed] medical providers from charging in excess of the fee schedule amount" and therefore "operate[ed] as a 'state-imposed regulation' on air carrier rates."7
Like the district court, the panel rejected the argument that the McCarran-Ferguson Act (MFA) reverse preempts the ADA. Under the MFA, states retain authority to regulate the relationship between insurance companies and their policyholders. As such, state laws that regulate the business of insurance preempt any conflicting federal law unless that federal law specifically relates to the business of insurance.8 To determine whether a state law was enacted for the purpose of regulating the "business of insurance," the law must satisfy a three-part test: "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 insured; and third, whether the practice is limited to entities within the industry."9
Because the “balance billing provision,” i.e., the state law, "affects the billing and pricing practices of medical providers only with respect to insureds," the panel held that it "has nothing to do with the relationship between an insurer and an insured and therefore does not regulate the business of insurance."
The Bailey decision joins several recent rulings that enforce the preemptive effective of the ADA on state statutory and common law challenges to air ambulance operators' prices and services.10 It further underscores the reality that an air ambulance operator often has an obligation to provide emergency transport irrespective of the passenger's insurance coverage or ability to pay for such services.