Case: 18-50722 Document: 00515965541 Page: 1 Date Filed: 08/04/2021
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
August 4, 2021
No. 18-50722
Lyle W. Cayce
Clerk
Air Evac EMS, Incorporated,
Plaintiff—Appellee,
versus
Kent Sullivan, in his Official Capacity as Texas Commissioner of
Insurance; Cassie Brown, in her Official Capacity as Texas Commissioner
of Workers’ Compensation,
Defendants—Appellants,
versus
Texas Mutual Insurance Company; Liberty Mutual
Insurance Company; Zenith Insurance Company;
Hartford Underwriters Insurance Company; Twin City
Fire Insurance Company; Transportation Insurance
Company; Valley Forge Insurance Company; Truck
Insurance Exchange,
Intervenors—Appellants.
Appeal from the United States District Court
for the Western District of Texas
USDC No. 1:16-CV-60
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Before Stewart, Clement, and Ho, Circuit Judges.
James C. Ho, Circuit Judge:
Air Evac EMS, Inc., is an air ambulance provider that offers medical
transport services to a wide variety of patients. That includes patients who
are injured at their workplace. The price that Air Evac may charge for such
transportation is accordingly subject to conflicting regulatory regimes.
The Texas Workers’ Compensation Act (“TWCA”), Tex. Lab.
Code §§ 401.007–419.007, regulates the prices that insurers must pay to
providers for various medical services utilized by their beneficiaries. That
includes air transport services. But those price restrictions conflict with the
federal Airline Deregulation Act (“ADA”), which makes clear that the states
“may not enact or enforce a law, regulation, or other provision . . . related to
a price, route, or service of an air carrier that may provide air transportation
under this subpart.” 49 U.S.C. § 41713(b)(1).
The price restrictions are not saved by the McCarran–Ferguson Act.
That act makes clear that “[n]o Act of Congress shall be construed to
invalidate, impair, or supersede any law enacted by any State for the purpose
of regulating the business of insurance, or which imposes a fee or tax upon
such business, unless such Act specifically relates to the business of
insurance.” 15 U.S.C. § 1012(b). But the price regulations at issue here do
not govern “the business of insurance.” The McCarran–Ferguson Act
concerns state efforts to regulate the relationship between insurers and
insureds—not between insurers and providers.
We accordingly affirm. In doing so, we agree with our sister courts of
appeals, which have unanimously held that the ADA preempts state price
caps on air ambulance reimbursements, and that those state price caps are
not saved by the McCarran–Ferguson Act. And we disagree with the Texas
Supreme Court, which has reached contrary conclusions by a divided vote.
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I.
Under the TWCA, employees in Texas receive guaranteed medical
care paid for by employer-funded insurance policies, in exchange for
relinquishing their common-law workplace injury claims. As part of this
regulatory scheme, the TWCA strictly regulates the prices that private
insurers must pay health care providers for treating workers injured on the
job. See Tex. Lab. Code § 413.011; 28 Tex. Admin. Code §§ 134.1,
134.203. The TWCA also prohibits providers from engaging in “balance-billing”—that is, they cannot collect any remaining balance from either the
employer or employee after an insurer has reimbursed the provider less than
the full amount for the services rendered. See Tex. Lab. Code
§ 413.042(a).
Air Evac contends that these price caps are preempted by the ADA.
So it sued various Texas state officials, seeking a declaration that the ADA
preempts the TWCA and its regulations, and an injunction barring
enforcement of the price caps. Alternatively, Air Evac requested an
injunction barring enforcement of the TWCA’s balance-billing prohibition.
Eight insurance companies joined the Texas officials as intervenors to
defend Texas law. Together they moved to dismiss the case on various
jurisdictional grounds. The district court granted the motion, but we
subsequently reversed. See Air Evac EMS, Inc. v. Tex., Dep’t of Ins., Div. of
Workers’ Comp., 851 F.3d 507, 510 (5th Cir. 2017).
On remand, the district court granted Air Evac’s motion for summary
judgment on its claim that the Texas price caps were preempted by the ADA
and not saved by the McCarran–Ferguson Act. See Air Evac EMS, Inc. v.
Sullivan, 331 F. Supp. 3d 650, 667 (W.D. Tex. 2018). Consequently, it did
not address Air Evac’s alternative balance-billing claim.
Id. at 656 n.4. The
district court enjoined enforcement of Texas Labor Code § 413.011 and
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Texas Administrative Code §§ 134.1 and 134.203 as applied to Air Evac. Id.
at 664.
Both the State and the eight insurance companies appealed.
Following oral argument in this case, the Supreme Court of Texas decided a
similar case addressing the same issues. See Tex. Mut. Ins. Co. v. PHI Air
Med., LLC, 610 S.W.3d 839 (Tex. 2020), cert. denied, _ S. Ct. _,
2021 WL
1602647 (Apr. 26, 2021) (mem.). Contrary to the district court here and our
sister courts of appeals that have examined these issues, the Texas Supreme
Court held that the TWCA price caps on air ambulance providers are not
preempted by federal law. But it did so over a thorough dissent supported by
two members of the court.
Id. at 865 (Green, J., joined by Hecht, C.J.). Seven
members sided with the majority, but for differing reasons—six concluded
that the ADA does not preempt the TWCA price caps,
id. at 843, while four
concluded that the TWCA price caps are saved by the McCarran–Ferguson
Act,
id. at 856.
We review summary judgment rulings de novo. IberiaBank v.
Boussard, 907 F.3d 826, 842 (5th Cir. 2018).
II.
Congress enacted the ADA in 1978, introducing free-market
principles to a heavily regulated and stagnating aviation industry. To
streamline regulations, avoid a patchwork of state protocols, and “ensure
that the States would not undo federal deregulation with regulation of their
own,” Congress included an express preemption provision. Morales v. Trans
World Airlines, Inc., 504 U.S. 374, 378 (1992).
Under the express preemption provision, “[a] State[] . . . may not
enact or enforce a law, regulation, or other provision having the force and
effect of law related to a price, route, or service of an air carrier that may
provide air transportation under this subpart.” 49 U.S.C. § 41713(b)(1). The
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Supreme Court has made clear that this express preemption provision “has
a ‘broad scope’” and “an ‘expansive sweep,’” and that the “ordinary
meaning of these words . . . express a broad pre-emptive purpose.” Morales,
504 U.S. at 383–84 (citations omitted).
Two of our sister circuits have unanimously held that the ADA
preempts price controls on air ambulance services set by state workers’
compensation regulations. See Air Evac EMS, Inc. v. Cheatham, 910 F.3d 751
(4th Cir. 2018); EagleMed LLC v. Cox,
868 F.3d 893 (10th Cir. 2017). We
agree.
As a threshold matter, Texas and the insurers urge that we adopt a
presumption against preemption when it comes to issues of traditional state
law such as workers’ compensation. We need not address that contention
here, however, because we do not regard this as a close call—the text of the
ADA plainly governs this case. See, e.g., Cheatham, 910 F.3d at 762 n.1
(“[W]e need not enter the great preemption presumption wars here because
the text of the preemption provision . . . governs the disposition of this
case.”).
Under the ADA, a state may not enforce any law or regulation that is
(1) “related to a price” of (2) an “air carrier” that (3) may provide air
transportation “under this subpart.” 49 U.S.C. § 41713(b)(1). Each of those
elements is satisfied here. We address each in turn.
A.
The TWCA regulations in question plainly involve the “price” of air
transport services. The ADA defines “price” as “a rate, fare, or charge.”
49 U.S.C. § 40102(a)(39). We see no reason to depart from the ordinary
meaning of these terms. The term “price” simply means the “sum of money
. . . asked or given for something” in return. American Heritage
Dictionary of the English Language 1038 (1979). See also
id. at
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1082 (defining “rate” as “a charge or payment calculated in relation to any
particular sum or quantity”); id. at 476 (defining “fare” as a “transportation
charge”);
id. at 226 (defining “charge” as “to set or ask (a given amount) as
a price”).
The TWCA regulations plainly govern “price”—namely, the price
that Air Evac is allowed to charge Texas workers’ compensation insurers for
air ambulance services.
For their part, Texas and the insurers contend that the term “price”
applies only to competitive markets—and that “air ambulances do not
operate in a market that would dictate the price or rate charged in the absence
of government interference.” Under that view, any amount that is
determined by a regulator for a particular good or service would not
constitute a “price.” That would make terms like “price controls” an
oxymoron. Yet the term is ubiquitous in our law. “Consistent usage, as
reflected in numerous judicial opinions, can be an authoritative source of
common parlance.” Frederking v. Cincinnati Ins. Co., 929 F.3d 195, 198 (5th
Cir. 2019) (citing New Prime Inc. v. Oliveira,
139 S. Ct. 532, 540 (2019)). See,
e.g., Yakus v. United States,
321 U.S. 414, 418 (1944) (concerning the
constitutionality of the Emergency Price Control Act of January 30, 1942,
56
Stat. 23); United States v. Uni Oil, Inc.,
710 F.2d 1078, 1080 (5th Cir. 1983)
(concerning federal “price controls” on oil). See also Address to the Nation
Outlining a New Economic Policy: “The Challenge of Peace”, Public
Papers of President Richard M. Nixon 888 (Aug. 15, 1971) (“I
am today ordering a freeze on all prices and wages throughout the United
States for a period of 90 days. In addition, I call upon corporations to extend
the wage-price freeze to all dividends.”); Exec. Order No. 11,615—Providing
for Stabilization of Prices, Rents, Wages, and Salaries,
36 Fed. Reg. 15,727
(Aug. 15, 1971). In response, Texas and the insurers rely on Hodges v. Delta
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Airlines, Inc., 44 F.3d 334, 336 (5th Cir. 1995) (en banc). But in Hodges we
construed the term “service,” not “price,” under the ADA.
In sum, the amount that TWCA rules would allow Air Evac to receive
for its air ambulance services falls well within the term “price” under the
ADA. Accordingly, those TWCA rules plainly “relate to” price.
As the Supreme Court has observed, the term “related to” under the
ADA is broad and indeed “much more broadly worded” than other
preemption provisions. Northwest, Inc. v. Ginsberg, 572 U.S. 273, 283 (2014).
See also Morales, 504 U.S. at 383–85. A law “relate[s] to” price under the
ADA so long as it has a “connection with or reference to” price or presents
a “significant effect” on the price of air services. Morales,
504 U.S. at 384,
388. See also Buck v. Am. Airlines, Inc.,
476 F.3d 29, 34–35 (1st Cir. 2007)
(“[T]he ADA preempts both laws that explicitly refer to an airline’s prices
and those that have a significant effect upon prices.”); Travel All Over the
World, Inc. v. Saudi Arabia,
73 F.3d 1423, 1433 (7th Cir. 1996) (declining to
find preemption when plaintiffs’ tort claims neither “expressly refer to
airline rates, routes, or services,” nor have a “‘forbidden significant
[economic] effect’ on airline rates, routes, or services”) (alteration in
original).
The TWCA regulations challenged here obviously have a “significant
effect” on Air Evac’s prices—they effectively forbid Air Evac from
recovering from workers’ compensation insurers the price that they would
otherwise charge for air ambulance services. As we have previously noted,
the “TWCA’s provisions effectively set a reimbursement rate” on air
ambulance services by restricting the amount insurers pay them. Air Evac,
851 F.3d at 514. See also PHI Air Med., 610 S.W.3d at 866 (Green, J.,
dissenting) (“The TWCA’s reimbursement scheme is related to an air
ambulance’s prices because it indirectly limits the amount than an air carrier
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may charge for its services.”). As the Fourth Circuit put it, “[i]f such actions
involving an air carrier are not ‘related to price,’ it is unclear what meaning
the phrase would have left.” Cheatham, 910 F.3d at 767–68.
B.
We likewise have little trouble concluding that Air Evac qualifies as an
“air carrier.” The ADA defines an “air carrier” as “a citizen of the United
States undertaking by any means, directly or indirectly, to provide air
transportation.” 49 U.S.C. § 40102(a)(2). Air ambulances transporting
patients to hospitals fall squarely within that definition. Courts are agreed on
this point. See, e.g., Cheatham,
910 F.3d at 764; Bailey v. Rocky Mountain
Holdings, LLC,
889 F.3d 1259, 1266–68 (11th Cir. 2018); Cox,
868 F.3d at
904; Stout v. Med-Trans Corp.,
313 F. Supp. 3d 1289, 1294 (N.D. Fla. 2018);
Schneberger v. Air Evac EMS, Inc.,
2017 WL 1026012, *2 (W.D. Okla.); Valley
Med Flight, Inc. v. Dwelle,
171 F. Supp. 3d 930, 933–34 (D.N.D. 2016); Med-Trans. Corp. v. Benton,
581 F. Supp. 2d 721, 732 (E.D.N.C. 2008); PHI Air
Med., 610 S.W.3d at 843. As are federal agencies. Air Evac holds a “Part
135” operating certificate from the Federal Aviation Administration
(“FAA”) allowing it to “operate as an air carrier and conduct common
carriage operations.” ROA.1235. The Department of Transportation
(“DOT”) also recognizes Air Evac as an “air carrier” under “Part 298,”
which grants it a license to operate as an air taxi. ROA.1239.
Nevertheless, Texas and the insurers insist that air ambulances are not
“air carriers” under the ADA because Congress’s purpose in enacting the
ADA was to cover only commercial, passenger airlines. But we are governed
by the text of the statute. See, e.g., Morales, 504 U.S. at 383 (“[W]e . . . begin
with the language employed by Congress and the assumption that the
ordinary meaning of that language accurately expresses the legislative
purpose.”) (quotations and citations omitted). Neither Texas nor the
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insurers have “presented a single textual reason to support the argument that
the broad language of the [ADA]’s express preemption provision should not
include air-ambulance services.” Cox, 868 F.3d at 904.
C.
Finally, air ambulances “provide air transportation under this
subpart”—that is, under subpart II of the amended Federal Aviation Act.
49 U.S.C. § 41713(b)(1). Air ambulance companies hold a registration issued
by the Secretary of Transportation and are subject to certain economic
regulations under subpart II. 14 C.F.R. pt. 298. That is all that is required
under the plain text of § 41713(b)(1).
The State and the insurers argue that Air Evac is not sufficiently
subject to subpart II because the Secretary has exempted air ambulances from
the general requirement to hold a certificate of public convenience and
necessity. But § 41713(b)(1) simply requires air carriers to “provide air
transportation” under subpart II—it does not require air carriers to be
certified under subpart II. Other courts that have examined this issue have
reached the same conclusion. See, e.g., Cheatham, 910 F.3d at 764–65
(agreeing “with Air Evac that the phrase ‘under this subpart’ includes all air
carriers regulated by the Secretary of Transportation under subpart II, rather
than those specifically certified under the subpart”); Hughes Air Corp. v. Pub.
Utils. Comm’n, 644 F.2d 1334, 1338–39 (9th Cir. 1981) (holding that air
carriers operating under an exemption still fell within the ADA’s preemption
provision). We agree that air ambulance providers like Air Evac provide air
transportation under subpart II.
…
Accordingly, we hold that the ADA expressly preempts TWCA
reimbursement regulations as applied to air ambulance services.
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III.
The TWCA reimbursement regulations are not saved by the
McCarran–Ferguson Act. As relevant here, the McCarran–Ferguson Act
shields from federal preemption those state laws that are “enacted . . . for the
purpose of regulating the business of insurance,” unless the federal statute
“specifically relates to the business of insurance.” 15 U.S.C. § 1012(b). So
the Act “precludes application of a federal statute in [the] face of state law
‘enacted . . . for the purpose of regulating the business of insurance,’ if the
federal measure does not ‘specifically relat[e] to the business of insurance,’
and ‘would invalidate, impair, or supersede’ the State’s law.” Humana Inc.
v. Forsyth,
525 U.S. 299, 307 (1999) (alterations in original) (quoting U.S.
Dep’t of Treasury v. Fabe,
508 U.S. 491, 501 (1993)).
It is undisputed that the ADA does not “specifically relate to” the
business of insurance. So the sole issue is whether the TWCA was enacted
“for the purpose of regulating the business of insurance”—that is, if it has
the “‘end, intention, or aim’ of adjusting, managing, or controlling the
business of insurance.” Fabe, 508 U.S. at 505 (quoting Black’s Law
Dictionary 1236, 1286 (6th ed. 1990)).
That requires determining whether the challenged provisions of the
TWCA regulate “the relationship between the insurance company and the
policyholder.” Id. at 501 (quoting SEC v. Nat’l Sec., Inc.,
393 U.S. 453, 460
(1969)). The McCarran–Ferguson Act “assure[s] that the activities of
insurance companies in dealing with their policyholders would remain subject
to state regulation.” Nat’l Sec.,
393 U.S. at 460 (emphasis added).
The TWCA regulations at issue here deal with the relationship
between insurers and providers—namely, the providers of air ambulance
services—and not the relationship between insurers and their beneficiaries.
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Accordingly, the TWCA regulations are not shielded from federal
preemption under the McCarran–Ferguson Act.
A.
In Group Life & Health Insurance Company v. Royal Drug Company,
440 U.S. 205 (1979), the Supreme Court made clear that the “focus” of our
inquiry is whether the insurance practice that is the subject of state regulation
governs “the relationship between the insurance company and the
policyholder.”
Id. at 216 (quoting Nat’l Sec.,
393 U.S. at 460). That
relationship is “the core of the ‘business of insurance.’” Id. at 215. See also
Fabe,
508 U.S. at 493 (“We hold that the Ohio priority statute escapes preemption to the extent that it protects policyholders.”). In addition, the Court
identified two other criteria: “whether the practice has the effect of
transferring or spreading a policyholder’s risk,” and “whether the practice
is limited to entities within the insurance industry.” Union Lab. Life Ins. Co.
v. Pireno,
458 U.S. 119, 129 (1982) (citing Royal Drug, 440 U.S. at 211–12,
215, 231).
The TWCA regulations fail under all three criteria. See, e.g., PHI Air
Med., 610 S.W.3d at 876–77 (Green, J., dissenting) (concluding that the
TWCA regulations fail under all three factors identified in Royal Drug and
Pireno).
To begin with, the TWCA regulations govern the relationship
between insurers and providers, not insurers and insureds. So the regulations
do not involve the “business of insurance” under the first criteria.
The Court reached precisely the same conclusion under similar facts
in Royal Drug. It held that an insurer’s agreement to reimburse pharmacies
for the cost of prescription drugs if the pharmacies offered the drugs to the
insurer’s policyholders for $2 did not involve the “business of insurance.”
Royal Drug, 440 U.S. at 212–14. To conclude otherwise would “confuse the
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obligations of [the insurer] under its insurance policies”—which involved
the insurer–insured relationship—“and the agreements between [the
insurer] and the participating pharmacies, which serve only to minimize the
costs [the insurer] incurs in fulfilling its underwriting obligations.” Id. at 213.
The defining feature of the insurer–insured relationship is the exchange of
insurance premiums in order to obtain medical benefits. The particulars of
any exchange between insurers and pharmacies are merely ancillary features
that are not part of the “business of insurance.” And even though any cost
savings might be passed on to policyholders in the form of reduced
premiums, individual beneficiaries were “basically unconcerned” with any
specific business arrangements between the insurer and the pharmacy, so
long as the beneficiaries received the promised benefits.
Id. at 214. As the
Court put it, McCarran–Ferguson “exempts the ‘business of insurance’ and
not the ‘business of insurance companies.’”
Id. at 217. “It is next to
impossible to assume that Congress could have thought that agreements
(even by insurance companies) which provide for the purchase of goods and
services from third parties at a set price are within the meaning of that phrase
[i.e. ‘business of insurance’].”
Id. at 230.
By the same logic, the TWCA regulations challenged here likewise do
not involve the relationship between the insurer and the insured. As in Royal
Drug, the regulations help reduce costs to the workers’ compensation
insurance carrier. But employers and employees are “basically
unconcerned” with how the insurer structures its payments or how much
any single service provider is paid. Id. at 214. After all, the amount the
insurer pays the provider is not a benefit to the insured. In sum, the focus of
the TWCA regulations is on the relationship between insurer and provider,
not insurer and insured.
The insurers here try to avoid Royal Drug by contending that the
TWCA reimbursement cap is “critical to the spreading of risk” by limiting
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the overall liabilities of insurers. But that argument proves too much. If the
insurers are right, then “almost every business decision” would be part of
the “business of insurance,” because virtually every business decision has
“some impact” on premium amounts and policy issuance. Id. at 216–17. Yet
this is exactly the type of downstream effect that the Supreme Court has
placed outside the “business of insurance.” After all, “[s]uch cost-savings
arrangements may well be sound business practice, and may well inure
ultimately to the benefit of policyholders in the form of lower premiums, but
they are not the ‘business of insurance.’”
Id. at 214.
The TWCA regulations also fail under the two remaining criteria.
Reimbursement arrangements between insurers and providers do not
meaningfully affect the allocation of risk between insurer and insured. The
arrangement may help limit the insurer’s costs, but it does not substantially
affect the transfer of risk from the insured to the insurer. Nor is the subject
of the regulations “limited to entities within the insurance industry.” Pireno,
458 U.S. at 129. Air Evac is an air ambulance company, not an insurance
company.
B.
For their part, Texas and the insurers contend that the three criteria
set forth in Royal Drug and Pireno apply in cases involving the application of
certain enumerated federal antitrust statutes, and have only limited
applicability to other federal laws like the ADA. See 15 U.S.C. § 1012(b).
But nothing in the text of the McCarran–Ferguson Act suggests that
we should give the term “business of insurance” a different meaning when it
comes to applying the Act to other federal statutes like the ADA. “[W]e
‘cannot imagine that “business of insurance” could have two different
meanings in the same statutory subsection.’” Bailey, 889 F.3d at 1273 n.30
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(quoting Blackfeet Nat’l Bank v. Nelson, 171 F.3d 1237, 1246 n.13 (11th Cir.
1999)).
Accordingly, our court has applied the Royal Drug–Pireno framework
to federal statutes other than the enumerated antitrust provisions. See Am.
Bankers Ins. Co. of Fla. v. Inman, 436 F.3d 490, 493–94 (5th Cir. 2006);
Munich Am. Reinsurance Co. v. Crawford,
141 F.3d 585, 590–91 (5th Cir.
1998).
…
We hold that the TWCA regulations concerning the reimbursement
of air ambulance providers like Air Evac are preempted by the ADA, and are
not saved by the McCarran–Ferguson Act. Accordingly, we affirm.
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