On January 14, 2019, Chief Judge Daniel L. Hovland of the United States District Court for the District of North Dakota held that a North Dakota statute limiting the fees charged by air ambulance companies was preempted by the federal Airline Deregulation Act (ADA) and struck it down.  The ruling, however, upheld the law’s provision prohibiting air ambulance companies from offering subscription services because that provision regulated the business of insurance and, therefore, was saved from preemption by the McCarran-Ferguson Act. 

            The case stemmed from Guardian Flight, LLC’s action seeking a declaratory judgment that a North Dakota law regulating air ambulance services was preempted by the ADA.  Air ambulance companies, like Guardian Flight, transport patients facing medical emergencies, often from rural or remote locations.  Under the federal Emergency Medical Treatment and Labor Act (EMTALA) and state law, air ambulance companies are required to transport emergency patients without regard to their ability to pay.  How much air ambulance companies are paid for their services depends on whether the patient has insurance and whether the air ambulance company is in-network with the patient’s insurance plan.  Where no in-network insurance coverage is available, patients can receive significant balance bills. 

            To address the issue, the North Dakota legislature passed a law regulating aspects of payment for air ambulance services, which was codified at N.D.C.C. §§26.1-47-08 and 26.1-47-09.  Guardian Flight challenged two provisions of the law.  First, it challenged the law’s requirement that payment by an insurer to an air ambulance company be considered full and final payment, thereby prohibiting air ambulance companies from balance billing patients.  Second, it challenged the provision that prohibited air ambulance companies from offering subscription services, pursuant to which individuals paid an annual subscription fee, but then received no further bills in the event they required air ambulance services. The Court analyzed each of the challenged provisions separately, examining first whether they were preempted by the ADA and then whether they were saved from preemption by the McCarran-Ferguson Act. 

The ADA preempts state laws “related to a price, route, or service.”  The Court found that insofar as the law mandated that air ambulance companies accept insurance payments as payment in full and prohibited balance billing patients, it “obviously” related to air ambulance rates.  The Court further found that there “can be no question that such interference with air ambulance rates and prices is precisely the type of state regulation Congress sought to prevent when it included an express preemption clause in the ADA.”  Further, because the payment provision altered “the relationship between the provider and the patient rather than the insured and the insurer, it did not regulate the “business of insurance,” and, therefore, was not saved from preemption by the McCarran-Ferguson Act.  This holding was in line with several opinions across the county holding that the ADA preempts laws that impair air ambulance companies’ ability to recover their billed charges. 

            The Court reached a different conclusion with respect to the law’s provision prohibiting subscription services, which Judge Hovland found was saved from preemption.  In conducting his analysis, he looked first to the Black’s Law Dictionary definition of insurance, which provides that “insurance” is a “contract by which one party (the insurer) undertakes to indemnify another party (the insured) against risk of loss, damage, or liability arising from the occurrence of some specified contingency.”  Analyzing the prohibition on subscription agreements in light of this definition, the Court found:  “In the final analysis, we have a contract which, for a small fee, does nothing more than shift the risk of an unforeseeable contingent event from the member to the air ambulance…This is, by definition, insurance….”  Therefore, the prohibition on subscription agreements for air ambulance services was saved from preemption.

            The case is Guardian Flight, LLC v. Godfread, et al., Case No. 1:18-cv-007.  The opinion is linked here.