Concerns over how to calculate sometimes hefty air ambulance fees for reimbursement by workers compensation payers has prompted some federal action on the issue, but it remains unclear whether conflicting regulations and court rulings will be resolved any time soon.

A report on air ambulance fees is due from a federal committee this summer, with many workers comp representatives hoping it will give guidelines that can supersede the web of different rules and legal precedents they face.

Many states include air ambulance services on their workers comp fee schedules, but the 4th, 10th and 11th U.S. circuit courts of appeals and a handful of state courts have held the federal Airline Deregulation Act of 1978 preempts state law “related to price, route, or service of an air carrier” — including air ambulances.

“It’s a little bit ironic that (the federal law) was passed to engender competition among airlines, and it did … but there is no competitive market whatsoever when it comes to air ambulances,” said Mary Nichols, senior vice president and general counsel for Austin-based Texas Mutual Insurance Co. “Nobody’s ever lying on the ground injured” and negotiating prices with two helicopters, she said.

Payments for all ambulance services in workers compensation have increased since 2013, and air ambulance services — which comprise just 5% of all ambulance-related workers compensation transportation — accounted for nearly half of all ambulance payments in 2017, according to research by the Boca Raton, Florida-based National Council on Compensation Insurance.

Group health insurers have also seen increases, and in January the federal Air Ambulance and Patient Billing Advisory Committee, comprised of representatives from the air ambulance industry and group health and workers comp insurers, met for the first time to review air ambulance regulations and fee transparency.

“I think there is pretty widespread belief that there will not be clarity until there is some type of federal legislation on this issue,” said Jennifer Wolf, executive director of the Middleton, Wisconsin-based International Association of Industrial Accident Boards and Commissions, which sent a statement to the advisory committee on Feb. 5 affirming its support of state authority to regulate air ambulances in workers compensation.

“States are looking for clarity in the law so that they can make sure that the workers compensation system has transparent pricing … and safety and protocols in place for the utilization of air ambulance transport for injured workers,” she said.

In California, where no official medical fee schedule exists for air ambulance services, the state’s State Compensation Insurance Fund has seen its average payment per air ambulance bill increase 77%, said Stephen Hunckler, the fund’s San Francisco-based chief claims operations officer, in an email.

The Texas Division of Workers Compensation recently reported that it had 1,626 air ambulance bill disputes as of Dec. 2, 2019, with $48,000 being the average charge per transport in these disputes.

The Nebraska Workers Compensation Court in 2016 held in Valdovinos v. Casetlan Construction that its jurisdiction was not preempted by the federal Airline Deregulation Act and reduced an air ambulance bill from $40,000 to $9,400, or 150% of the Medicare reimbursement rate.

However, injured workers have been balance billed for emergency air transportation, said Lincoln, Nebraska-based attorney Jon Rehm, shareholder at the law firm Rehm, Bennett, Moore & Rehm.

In Kentucky, insurers began pushing back against large air ambulance bills more than a decade ago and the state increased the workers comp fee schedule amount. It appears air ambulance providers and insurers have adhered to the change, said Timothy Feld, general counsel for Lexington-based Kentucky Employers Mutual Insurance Co. Under the state’s current fee schedule, air ambulances are reimbursed at 210% of Medicare.

On Feb. 25, oral arguments are scheduled to begin before the Texas Supreme Court in PHI Air Medical LLC v. Texas Mutual Insurance Co., in which Texas Mutual, the Texas DWC and a half dozen other insurers hope the court will find that states have the authority to regulate the relationship between insurers and employers with respect to air ambulance fees. Similarly, Texas Mutual is also awaiting a decision in Air Evac EMS Inc. v. State of Texas, Department of Insurance in the 5th U.S. Circuit Court of Appeals in New Orleans.

Neither Phoenix-based PHI Air Medical LLC nor O’Fallon, Missouri-based Air Evac EMS Inc. returned calls requesting comment.

Steve Bennett, associate general counsel and director of workers compensation programs for Washington-based American Property Casualty Insurance Association, said he hopes that the federal committee will affirm the states’ power to regulate workers comp.

The air ambulance advisory committee, which was established in the fall of 2019 by the Secretary of Transportation Elaine Chao and the Secretary of Health and Human Services Alex Azar under a requirement in the Federal Air Administration Reauthorization Act of 2018, includes air ambulance representatives, group health insurers, and a representative in the workers compensation industry. The committee is accepting public comments and has until mid-July to release its recommendations.

“It’s not just the cost; in workers comp, once we start getting into disputes and attorneys’ fees, the system becomes inefficient,” Mr. Bennett said. “There at least needs to be a clarifying statement from Congress that no preemption is intended or that states are allowed to regulate reimbursement for air ambulance service.”