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Costly air ambulances burden comp system

Posted On: Jul. 3, 2017 12:01 AM CST

Costly air ambulances burden comp system

Concern about the prices charged by air ambulances — an issue that has been on the radar of the general health care industry for several years — is gaining increasing attention in the workers compensation sector.

In the general health care market, air ambulance companies often balance-bill patients the difference between their billed charges and the amount insurance will pay for their services. The outcry generated by patients suddenly saddled with huge medical bills has caught the attention of regulators on the state and federal levels.

On the workers comp side, patients can’t be balance-billed, so disputes over charges between air ambulance companies and comp insurers often end up in court.

The Manasquan, New Jersey-based National Conference of Insurance Legislators established an air ambulance task force in March to examine how to protect consumers from excessive and often out-ofnetwork billing. The Kansas City, Missouribased National Association of Insurance Commissioners is studying the issue and requested detailed information about air ambulance costs from the National Council on Compensation Insurance in April.

In aggregate, air ambulance charges increased between 2011 and 2015, said Peter Burton, senior division executive for state relations at the Boca Raton, Floridabased NCCI.

Some states have implemented fee schedules regulating workers comp reimbursement rates for air ambulances. However, the Airline Deregulation Act of 1978 prevents states from regulating rates, routes or services of any air carrier. Because air ambulances are required to obtain an air carrier certificate, they have successfully argued in some litigation that their services cannot be rate-regulated.

“It’s a cynical argument and doesn’t reflect reality, but they are winning because of the technical words in the statute,” said Matthew Baumgartner, shareholder with law firm Graves, Dougherty, Hearon & Moody P.C. in Austin, Texas, which represents Texas Mutual Insurance Co., one of the workers comp insurers involved in air ambulance litigation in Texas. “It’s really just a fallacy that the Airline Deregulation Act and its promotion of the market at the expense of state regulation applies in this context at all. In my view, that argument will not continue to prevail as these cases progress through the courts.”

The emerging state vs. federal rights issue reaches back even further, to the McCarran-Ferguson Act of 1945, which gives states the authority to regulate the business of insurance unless federal law specifies otherwise.

“The question of which law governs air ambulance rates in the workers compensation context — state workers compensation laws or the federal ADA law — has become a friction point in recent years,” the NAIC said in a statement.

Mr. Baumgartner said air ambulances have grown into a profitable cottage industry with little competition 
among a handful of large providers. Air ambulance providers typically don’t join insurance networks or affiliate with hospitals, and lack of both negotiated rates and competition has led to exponential increases in billed charges, he said. Historically, insurers paid billed charges or a sizable percentage of them, Mr. Baumgartner said.

“The tide is shifting on that now because their billed charges are increasing so much,” he said. “Air ambulances provide a critical service, but most people I think believe there are now too many of them and they are driving costs up unnecessarily.

I suspect there is a correction going on now by the big insurance companies.” Texas Insurance Commissioner Ryan Brannan said cost control is important to the state’s voluntary workers comp system, and that high charges for services like air ambulances could drive employers out of the system and hurt workers.

“For us, the driving issue is really the rate or payment that the air ambulance services are providing and whether or not they have to play by the same rules as other providers,” Mr. Brannan said. “If not, then our concern is that it could significantly raise costs to employers.”

“If the state does not have the ability to regulate the rates paid for these services, then the costs skyrocket,” he said, noting the Texas Department of Insurance has joined cases being litigated in Texas state and federal courts.

In 2015, a Texas administrative law judge heard 33 disputed cases involving air ambulance services provided by Phoenixbased PHI Air Medical and determined that proper reimbursement for air ambulance services was 149% of the Medicare reimbursement amount. PHI was seeking full reimbursement during the medical fee dispute resolution. The judge ruled in that case that the Texas Workers’ Compensation Act, including reimbursement requirements, is not pre-empted by the Airline Deregulation Act and that the McCarran-Ferguson Act governs the workers comp act and rules applying to it.

U.S. Sen. John Tester, D-Montana, introduced a bill in February to allow state governments to regulate air ambulance billing and pricing practices. Although federal regulation could provide clarity, experts expect the issue to be decided in the courts.

“I suspect that high-level appellate courts, possibly even the Supreme Court, will say something about this in the coming two to four years,” Mr. Baumgartner said.