NATIONAL CENTER FOR STATE COURTS - North Dakota Supreme Court
Nos. 19-1343, 19-1381 N THE UNITED STATES COURT OF …JON GODFREAD, in his capacity as North Dakota...
Transcript of Nos. 19-1343, 19-1381 N THE UNITED STATES COURT OF …JON GODFREAD, in his capacity as North Dakota...
Nos. 19-1343, 19-1381
IN THE
UNITED STATES COURT OF APPEALS FOR THE EIGHTH CIRCUIT
GUARDIAN FLIGHT, LLC,
Plaintiff-Appellant/Cross-Appellee,
v.
JON GODFREAD, in his capacity as North Dakota Insurance Commissioner; WAYNE STENEHJEM, in his capacity as North Dakota Attorney General,
Defendants-Appellees/Cross-Appellants.
On Appeal from the United States District Court for District of North Dakota
District Court No. 1:18-cv-007
BRIEF OF AMERICA’S HEALTH INSURANCE PLANS AS AMICUS
CURIAE IN SUPPORT OF APPELLEES/CROSS-APPELLANTS
Julie Simon Miller Thomas M. Palumbo AMERICA’S HEALTH INSURANCE PLANS 601 Pennsylvania Ave. NW South Building, Suite 500 Washington, DC 20004
Hyland Hunt Ruthanne M. Deutsch DEUTSCH HUNT PLLC 300 New Jersey Ave. NW Suite 900 Washington, DC 20001 Tel.: 202-868-6915 Fax: 202-609-8410 Email: [email protected]
Attorneys for Amicus Curiae America’s Health Insurance Plans
i
CORPORATE DISCLOSURE STATEMENT
Under Rule 26.1 of the Federal Rules of Appellate Procedure, amicus curiae
America’s Health Insurance Plans, Inc. (AHIP) submits the following corporate
disclosure statement:
AHIP has no parent corporation and no publicly-traded company holds 10%
or more of AHIP’s stock. AHIP is a trade association whose members have no
ownership interests.
ii
TABLE OF CONTENTS
CORPORATE DISCLOSURE STATEMENT .......................................................... i
TABLE OF AUTHORITIES ................................................................................... iii
STATEMENT OF INTEREST OF AMICUS CURIAE ............................................. 1
INTRODUCTION AND SUMMARY OF ARGUMENT ........................................ 2
ARGUMENT ............................................................................................................. 7
State Regulation Is Needed To Enhance Insurance Providers’ Ability To Protect Consumers From High Costs And Better Facilitate Access To Air Ambulance Services. .................................................................................................. 7
A. Air Ambulances Presently Operate in a Regulatory Vacuum. ................... 8
1. Competitive forces do not meaningfully constrain air ambulance pricing. ............................................................................. 8
2. Virtually all state efforts to regulate any aspect of insurance touching on air ambulances have been rebuffed. ............................. 12
B. The Regulatory Vacuum Has Resulted in Unconstrained Air Ambulance Pricing and Consumer Harm ................................................ 14
1. Air ambulance providers have largely refused to participate in health plan networks. ........................................................................ 15
2. The ability to send surprise medical bills and the lack of pricing transparency tip the scales of post-service negotiations in favor of exceptionally high bills for air ambulance services. .................... 21
3. Air ambulances’ refusal to participate in networks and heightened post-service leverage has resulted in skyrocketing costs for insurance providers and consumers. ................................. 24
CONCLUSION ........................................................................................................ 29
CERTIFICATE OF COMPLIANCE
CERTIFICATE OF SERVICE
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TABLE OF AUTHORITIES
CASES......................................................................................................................Page(s)
Frye v. Kansas City Missouri Police Dept., 375 F.3d 785 (8th Cir. 2004)) ............ 14
Rowe v. N.H. Motor Transp. Ass’n, 552 U.S. 364 (2008) ....................................... 11
Valley Med Flight, Inc. v. Dwelle, 171 F. Supp. 3d 930 (D.N.D. 2016) .......... 12, 22
STATUTES
Airline Deregulation Act of 1978, Pub. L. No. 95-504, § 3, 92 Stat. 1705 ............. 11
FAA Reauthorization Act of 2018, Pub. L. No. 115-254
§ 418(a) ................................................................................................................. 13
§ 418(b)(3)(B) ....................................................................................................... 13
§ 418(d)(3) ............................................................................................................ 13
42 U.S.C.
§ 18022(b)(1)(B) ................................................................................................... 18
§ 18031(c)(1)(B) ................................................................................................... 16
N.D.C.C. § 26.1-47-09(3) ................................................................................... 3, 34
REGULATIONS
45 C.F.R. 147.138(b)(3)(i)(A) ................................................................................. 22
OTHER AUTHORITIES
AHIP, Center for Policy and Research, Charges Billed by Out-of-Network Providers: Implications for Affordability (Sept. 2015) ................................. 16, 21
AHIP, State Policy Issue Brief: Air Ambulance Services (2016) ................. 9, 20, 26
AHIP, What’s the Role of Networks in Providing High-Quality Affordable Care? .................................................................................................. 16
ConsumersUnion, Up in the Air: Inadequate Regulation for Emergency Air Ambulance Transportation (Mar. 2017) ................................................................ 9
Peter Eavis, Air Ambulances Offer a Lifeline, and Then a Sky-High Bill, N.Y. TIMES (May 5, 2015) ..................................................................................... 24, 27
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Cindy Galli et al., Sky-Rage: Bills, Debt, Lawsuits Follow Helicopter Medevac Trips, ABC NEWS (Mar. 16, 2016) ................................................................ 25, 27
Sarah Gantz, Sky high air ambulance bills leave patients seeking relief, BALT. BUS. J. (Aug. 28, 2015) ................................................................................................. 24
Kaiser Family Foundation, Private Insurance: Surprise Medical Bills (Mar. 2016) ........................................................................................................... 21
Alison Kodjak, Taken for a Ride, NPR (Sept. 25, 2018) ......................................... 26
Md. Health Care Comm'n, Air Ambulance Study Required Under Senate Bill 770 (Dec. 2006) .................................................................................................... 17, 20
Mo. Dep’t of Ins., Fin. Institutions & Prof. Registration, Policy Brief: Health Coverage for Air Ambulance Transport .................................................. 10, 20, 27
Mont. State Leg., Final Report of the 2015-2016 Economic Affairs Interim Committee (May 2017) ................................................................................. 26, 27
N.M. Office of Superintendent of Ins., Air Ambulance Memorial: Study Report (Jan. 2017) ............................................................................................................ 25
Nat’l Conference of Ins. Legislators, Air Ambulance Task Force, Draft Minutes (July 15, 2017) ............................................................................................... 11, 22
Nat’l Conference of State Legislators, Insurance Carriers and Access to Healthcare Providers: Network Adequacy (Nov. 2015) ...................................... 16
Eric S. Peterson & Brian Maffly, Sky’s the Limit for What Utah Air Ambulances Can Charge—Like the $46K Bill This Man Received for a 50-mile Trip, SALT
LAKE TRIB. (Aug. 29, 2016) ................................................................................. 27
PHI, Inc., Annual Report (Form 10-K) (Feb. 23, 2018) .......................................... 18
Patrick A. Rivers & Saundra H. Glover, Health care competition, strategic mission, and patient satisfaction: research model and propositions, 22 J. HEALTH ORGANIZATION MGMT. 627 (2008) ........................................................ 16
U.S. GOV’T ACCOUNTABILITY OFFICE, GAO-10-907, AIR AMBULANCE: EFFECTS OF
INDUSTRY CHANGES ON SERVICES ARE UNCLEAR (2010) .................................... 18
U.S. GOV’T ACCOUNTABILITY OFFICE, GAO-17-637, AIR AMBULANCE: DATA
COLLECTION AND TRANSPARENCY NEEDED TO ENHANCE DOT OVERSIGHT (2017) ............................................................................................................ passim
U.S. GOV’T ACCOUNTABILITY OFFICE, GAO-19-292, AIR AMBULANCE: AVAILABLE DATA SHOW PRIVATELY-INSURED PATIENTS ARE AT FINANCIAL RISK 7 (2019) ......................................................................................................... passim
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STATEMENT OF INTEREST OF AMICUS CURIAE1
America’s Health Insurance Plans (AHIP) is the national trade association
representing the health insurance provider community. AHIP advocates for public
policies that expand affordable health care coverage to all Americans through a
competitive marketplace that fosters choice, quality, and innovation. Along with its
predecessors, AHIP has more than 60 years of experience in the industry. AHIP’s
members provide health care coverage and other financial health and wellness
benefits through employer-provided coverage, the individual insurance market, and
public programs such as Medicare and Medicaid. As a result, AHIP’s members
have broad experience working with a variety of stakeholders to ensure that
patients have access to needed treatments and medical services at affordable prices.
Those stakeholders include hospitals, physicians, clinics and laboratories, medical
transportation providers like ground ambulances and air ambulances, patients,
employers, state governments, the federal government, and pharmaceutical and
device companies.
AHIP writes to explain to the Court the adverse effects that result from air
ambulance providers operating in a regulatory vacuum—a vacuum created by
overly expansive interpretations of the Airline Deregulation Act to preempt
1 No counsel for any party authored this brief in whole or in part, and no person or entity other than the amicus, its members, or its counsel made a monetary contribution intended to fund the brief’s preparation or submission. All parties have consented to the filing of this brief. See Fed. R. App. P. 29(a)(2), (4).
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virtually all state regulations touching on air ambulance services. The resulting
inability of States to exercise even minimal oversight over insurance coverage for
air ambulances, much less the same oversight States exercise for other emergency
medical providers, allows air ambulance providers—who deliver essential
emergency medical services to patients who have no choice—to uncompetitively
price gouge health care consumers and insurance providers alike. Such
anticompetitive behavior increases the cost of life-saving services and threatens
patients’ ability to obtain affordable care and coverage.
INTRODUCTION AND SUMMARY OF ARGUMENT
To help understand the consumer harm caused by the absence of any
meaningful regulatory oversight to ensure fair and reasonable pricing for air
ambulance services, consider this scenario.
Imagine a person driving home from work in Grand Forks is seriously
injured in a car accident and rendered unconscious. Paramedics arrive on the scene,
and within minutes call for an air ambulance to airlift her to a hospital. Their
immediate priority is to stabilize the patient and to get her to a location that can
provide urgently needed medical care. They do not know—and should not care—
whether she has insurance, what her health plan is, or whether the air ambulance
provider is in her health plan’s network. She is airlifted to the hospital and,
happily, recovers. Although the air ambulance provider was not in-network, her
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insurance covers the service, compensating the air ambulance at a rate far above
what the insurance provider considers fair and reasonable or what it would have
negotiated ex ante if it had been able to do so. Even still, the patient receives a
surprise medical bill (a practice often referred to as “balance billing”) for the
portion of the fee not covered by insurance. This bill from the air ambulance
provider is for tens of thousands of dollars, even though her insurance company
had already paid more than would be paid to an in-network provider.
Now imagine, instead, that the patient’s health insurance contract includes
the claims settlement provision required by the North Dakota statute at issue here,
deeming her insurance provider’s payment to be an in-network payment. See
N.D.C.C. § 26.1-47-09(3). She is still airlifted, and still recovers. But this time
around she is not crippled financially after she recovers physically. The air
ambulance still receives reasonable payment for its services, and likely at a rate
that exceeds its costs and is far higher than it would receive from Medicare,
Medicaid, or any other payer. But there is no surprise medical bill confronting the
patient. The patient’s insurance works as she anticipated in avoiding risk, and she
is not forced to grapple with thousands of dollars of medical debt while she
recovers from her life-threatening injuries.
The second version of this story has a happier ending; the first,
unfortunately, is far more common. The simple truth is that given the emergency
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nature of air ambulance services, market forces alone cannot protect consumers
from price gouging. In most if not all cases, when the need (i.e., the demand) for
air ambulance transport arises, a patient has little or no control over their choice of
care, including the air ambulance provider. In other words, the demand for air
ambulance services is inherently inelastic—a patient will require the service
regardless of the cost and almost always without an opportunity to provide input,
consent or review options (if any may even exist). As a result, air ambulance
providers are not subject to any manner of price competition that one would
normally expect or encounter in a competitive market. This inherent lack of
competitive constraints is worsened by consolidation in the industry, which is
increasingly dominated by a handful of large providers and characterized by
regional or local markets susceptible to monopolization.
Regulation is required to restore balance and fairness to this marketplace.
Yet, for air ambulances, such oversight efforts have been rebuffed at every turn
due to expansive readings of the preemptive scope of the Airline Deregulation Act
and parsimonious interpretations of state authority to regulate insurance under the
McCarran-Ferguson Act. Although a federal effort to study the issue has begun, it
is in its infancy and even as it considers federal actions, expressly contemplates a
continued regulatory role for the States. This Court should likewise recognize state
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authority here, or North Dakota consumers will be unable to fully insure against
unconstrained and unfair air ambulance charges.
Air ambulances, like other emergency medical services, are generally
covered by health insurance, but the absence of state regulation has impaired health
insurance providers’ ability to constrain air ambulance pricing, by fostering low
participation of air ambulance providers in insurance networks. Health insurance
providers strive to offer value to consumers by arranging comprehensive yet
affordable networks of medical providers for enrollees to choose from, with pre-
negotiated payments. But this mechanism for ensuring fair and reasonable
compensation to medical providers (and avoiding unanticipated costs to those who
purchase insurance for just that reason) has broken down for air ambulances. This
is largely because air ambulance providers currently operate outside of the kinds of
state oversight applicable to all other emergency medical providers.
For other emergency medical providers, States have an array of tools to
ensure reasonable provider compensation, while avoiding unfair, excessive charges
to patients (and their health plans). And this system works even when the provider
is outside of the health plan’s network. States can, for example, increase the
transparency of costs and charges or protect consumers from being sent sky high
surprise medical bills after their insurance company has already paid more than a
reasonable rate. Because these tools constrain out-of-network emergency-service
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pricing, emergency providers have an incentive to negotiate pricing with health
insurance providers directly by entering plan networks—reaching mutual
agreement on a predictable (and reasonable) payment schedule before services are
rendered.
For air ambulances, however, the absence of state oversight, combined with
the structure of the market, yields wholly unconstrained and often exorbitant
charges. Operating outside of any state frameworks designed to ensure
transparency and promote reasonable out-of-network charges, air ambulances have
little incentive to join plan networks, preferring to bill, after the fact, whatever
amount they choose. The regulatory vacuum also means that there is little
information about the relationship between air ambulance providers’ actual costs
and the amount they bill, because they are not required to disclose costs. And the
prospect of air ambulances sending surprise medical bills to insurance providers’
enrollees in amounts that may reach into the tens of thousands of dollars likewise
gives air ambulances unwarranted leverage in negotiations with insurance
providers.
The combined upshot of all these factors—an absence of state oversight, a
lack of competition and traditional market-driven price restraints, a lack of
transparency, and air ambulance providers’ ability to send surprise medical bills to
patients—is a skewed market that allows air ambulance providers to extract
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payment of unreasonably high charges from insurance providers and still saddle
patients with thousands of dollars of medical debt, despite their attempts to insure
against precisely such risks. The end result is higher premiums for everyone who
purchases coverage, regardless of whether or not they ever receive emergency
medical care from an air ambulance. These harms persist largely because overly
expansive preemption rulings have prevented the States—the primary regulators of
insurance—from enforcing sensible policies designed to reign in otherwise out of
control, ever-escalating and anticompetitive air ambulance provider billed charges.
This is antithetical to the purpose and intent of both the Airline Deregulation Act
and the McCarran-Ferguson Act, and we encourage the Court to use this unique
opportunity to affirm the States’ traditional regulatory role regarding critical
emergency medical services.
ARGUMENT
State Regulation Is Needed To Enhance Insurance Providers’ Ability To Protect Consumers From High Costs And Better Facilitate Access To Air Ambulance Services.
As North Dakota argues, its law mandating that health insurance contracts
include terms requiring payments to air ambulance providers to be treated as “in-
network” payments satisfies the requirements for reverse preemption under the
McCarran-Ferguson Act, and is not preempted by the Airline Deregulation Act.
See N.D. Br. 24-25, 33-36, 38-43. AHIP concurs, and writes separately to explain
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the serious harm suffered by consumers, and the inability of insurance markets to
function effectively, when air ambulance providers operate in a regulatory
vacuum—as they do now. Given the nature of air ambulance services, market
forces alone cannot constrain them. And the efforts of States like North Dakota to
establish even the slightest regulatory guidelines touching on air ambulance
services—such as pricing transparency—have been stymied by air ambulance
providers at every turn.
In this regulation-free environment, the federal study tasked with examining
potential solutions is a welcome development. But it does not obviate the critical
need for state regulation, consistent with States’ long-standing authority to regulate
the business of insurance and the delivery of medical services. And States must try
to do everything they can to protect their citizens from suffering serious harm
caused by current air ambulance provider practices.
A. Air Ambulances Presently Operate in a Regulatory Vacuum.
1. Competitive forces do not meaningfully constrain air ambulance pricing.
As the district court found, air ambulance prices “surely are out of control.”
JA 99. And they will remain unchecked without regulation. Market forces cannot
meaningfully constrain air ambulance pricing for several reasons. First, patients in
need of emergency care cannot, and do not, choose whether to take an air
ambulance based on price. U.S. GOV’T ACCOUNTABILITY OFFICE, GAO-17-637,
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AIR AMBULANCE: DATA COLLECTION AND TRANSPARENCY NEEDED TO ENHANCE
DOT OVERSIGHT 18 (2017) (“2017 GAO Report”).2 Instead, medical professionals
decide when to order an air ambulance, based on medical necessity, typically in
two scenarios. Id. at 4-5. The first occurs when emergency responders determine
that a patient needs air ambulance transport from the scene of an accident to a
hospital. Id. The second occurs when hospital doctors decide that a patient urgently
requires care at a higher-level facility that must be reached within the shorter
timeframe made possible only by air transport. Id.
In both cases, demand is inelastic—a patient in critical need of emergency
air transport cannot opt out if the price is too high. Id. at 18. And although air
ambulances have expanded the areas they serve, the lack of competitive constraints
is still exacerbated in rural, remote, or otherwise underserved areas, where air
ambulance transport is often most crucial. AHIP, State Policy Issue Brief: Air
Ambulance Services, at 2 (2016) (“AHIP Issue Brief”)3; ConsumersUnion, Up in
the Air: Inadequate Regulation for Emergency Air Ambulance Transportation, at 2
(Mar. 2017) (describing how closures of rural hospitals have increased need for air
ambulances in rural areas).4 Increased capacity, moreover, is no guarantee of
2 Available at https://www.gao.gov/assets/690/686167.pdf. 3 Available at https://www.ahip.org/wp-content/uploads/2018/01/AHIP-Air-Ambulance-Issue-Brief-10-24-16-FINAL.pdf. 4 Available at http://consumersunion.org/wp-content/uploads/2017/04/Up-In-The-Air-Inadequate-Regulation-for-Emergency-Air-Ambulance-Transportation.pdf.
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increased competition or lower prices. In fact, the GAO found that three large, for-
profit operators dominate the industry, and prices have soared as the industry
consolidated. 2017 GAO Report at 6, 11. In addition, many areas have only one
provider, creating a localized monopoly. Mo. Dep’t of Ins., Fin. Institutions &
Prof. Registration, Policy Brief: Health Coverage for Air Ambulance Transport, at
7 (“Missouri Report”).5
Second, patients are in no position to choose among competing air
ambulance providers based on which provider is in-network for their health plan.
Instead, first responders or physicians select air ambulance providers based on
proximity or established relationships, generally without consideration of the
patient’s insurance plan. U.S. GOV’T ACCOUNTABILITY OFFICE, GAO-19-292, AIR
AMBULANCE: AVAILABLE DATA SHOW PRIVATELY-INSURED PATIENTS ARE AT
FINANCIAL RISK 7 (2019) (“2019 GAO Report”).6
Finally, air ambulance pricing is opaque. So even if opting out were
possible, a patient would lack the information needed to wisely comparison shop.
Even medical providers ordering an air ambulance—and health insurance
providers that foot the bill—are usually unaware of what the air ambulance
provider’s fee will be when the call is made to dispatch one, and they may never
5 Available at https://insurance.mo.gov/reports/documents/TheAirAmbulance CoverageGap2019ANAnnotations.pdf. 6 Available at https://www.gao.gov/assets/700/697684.pdf.
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know its costs. See 2017 GAO Report at 19-20; Nat’l Conference of Ins.
Legislators, Air Ambulance Task Force, Draft Minutes, at 2 (July 15, 2017)
(“NCOIL Minutes”) (statement by representative of air ambulance provider noting
that “the data to inform stakeholders about the true costs associated with providing
air medical services is extremely limited and there is no publicly available standard
cost data of air ambulance providers nationwide”).7
These market dynamics could not be more different from the market for
airline travel, where airlines compete aggressively based on transparent prices, and
travelers can easily choose to skip or reschedule a trip if the fares are too costly.
An expansive reading of the Airline Deregulation Act’s preemptive sweep thus
yields very different results for air ambulances than for airlines. Instead of the
“lower airline fares and better airline service” secured for airlines, Rowe v. N.H.
Motor Transp. Ass’n, 552 U.S. 364, 367-368 (2008), applying market-driven
commercial airline preemption rules to emergency-air-transport services has meant
less competition and soaring prices for air ambulances. As a result, the Airline
Deregulation Act, a statute designed to promote competition among airlines and
benefit consumers,8 has instead been used by air ambulance providers as a sword to
7 Available at http://ncoil.org/wp-content/uploads/2017/08/air-ambulance-minutes-chicago-final-7-25-17.pdf. 8 See Airline Deregulation Act of 1978, Pub. L. No. 95-504, § 3, 92 Stat. 1705, 1706 (declaring congressional policy to place “maximum reliance on competitive
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prevent States from fostering competition in the very different market for
emergency medical services.
2. Virtually all state efforts to regulate any aspect of insurance touching on air ambulances have been rebuffed.
With respect to insurance coverage for their services, air ambulances
presently operate in a virtually regulation-free zone. This case is North Dakota’s
second attempt to address issues related to air ambulance services. In 2015, North
Dakota passed a law requiring its emergency dispatchers to give first priority to air
ambulance providers that had entered into contract agreements with insurance
providers covering the majority of the state, which would have encouraged greater
network participation and reduced the number of North Dakotans subject to
exorbitant out-of-network surprise medical bills. See Valley Med Flight, Inc. v.
Dwelle, 171 F. Supp. 3d 930, 936-37 (D.N.D. 2016). Concluding that the law
effectively required air ambulance providers to enter into a contract with a
particular insurance provider, the court found the law preempted by the Airline
Deregulation Act. Id. at 941-42. A law that would have required air ambulance
providers to make their fee schedules public upon request was also invalidated. Id.
at 942. Although these regulations were designed to incentivize (but not require)
network participation and to foster transparency—and thereby promote more
market forces and on actual and potential competition” in the air transportation system).
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effective markets—they were nonetheless held preempted by a law meant to spur
competition. This result demonstrates both the extent of the paradoxical regulatory
vacuum in which air ambulances operate, and the critical need for some regulatory
guardrails.
In 2018, the federal government entered the fray. The FAA Reauthorization
Act of 2018, Pub. L. No. 115-254, § 418(a), requires the Department of
Transportation to form an advisory committee to review options for improving
transparency surrounding air ambulance services and protecting consumers from
surprise bills. This work is just beginning. And a federal advisory committee’s
solicitation of studies and proposals hardly means that the States have no role to
play. On the contrary, the Act requires the participation of state insurance
regulators in the federal advisory committee, id. § 418(b)(3)(B), and expressly
contemplates recommendations for the “prevention of balance billing to
consumers,” including by identifying steps that can be taken by States “consistent
with current legal authorities regarding consumer protection,” id. § 418(d)(3).
This incipient federal initiative expressly contemplates state participation for
good reason. Our federal system does not lightly assume that federal regulatory
activity precludes the exercise of state authority. Instead, it is premised on a system
of cooperative federalism, where both levels of government work hand-in-hand to
promote citizen welfare, particularly in areas like the regulation of health insurance
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where the States are in the heartland of their traditional police powers. See Frye v.
Kansas City Missouri Police Dept., 375 F.3d 785, 791 (8th Cir. 2004) (quoting Hill
v. Colorado, 530 U.S. 703, 715, (2000)) (“It is a traditional exercise of the State's
‘police powers to protect the health and safety of their citizens.’”). It is incumbent
on States to continue exercising their rightful authority—including insurance
regulations that touch on air ambulance providers—to fully address the current
regulatory vacuum and the resulting harms to public health and welfare.
B. The Regulatory Vacuum Has Resulted in Unconstrained Air Ambulance Pricing and Consumer Harm
Air ambulances are not the only emergency medical services where the most
vulnerable patients can neither comparison shop, nor turn down out-of-network
providers. But other emergency services, like ground ambulances and emergency
room care, do not share the extraordinarily high, uncontrolled pricing of air
ambulances. Why? For other emergency services, state regulations foster
transparency and otherwise shape the marketplace in ways that encourage
providers to join insurance networks—perhaps the most common way of ensuring
reasonable fees for emergency providers. But because of the regulatory vacuum
created by overly expansive readings of the Airline Deregulation Act’s preemption
provision, air ambulances have little incentive to join insurance networks and have
generally refused to do so. Instead, left unchecked by any regulatory safeguards,
air ambulance providers send exorbitant bills to insurance providers and patients
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alike after their lifesaving services have been rendered.
Health insurance providers—who strive to protect their enrollees from
receiving huge surprise medical bills—often have little choice but to accept or
otherwise negotiate from air ambulance providers’ unreasonable post-service
payment demands. This dynamic is compounded by a distinct informational
disadvantage due to an acute lack of transparency surrounding air ambulance
provider pricing. As a result, health insurance providers (as well as both regulators
and patients) oftentimes lack an air ambulance providers’ underlying cost
information. This paucity of supporting cost data prevents the billed party from
being able to make an informed determination about whether an air ambulance
provider’s billed charge is reasonable. This information imbalance benefits air
ambulance providers, whose receipts often far exceed any reasonable
approximation of their costs—at least as far as the limited data available indicate.
And this problem will only get worse if States continue to be stymied in their
attempts to address the structural problem of unconstrained air ambulance pricing.
1. Air ambulance providers have largely refused to participate in health plan networks.
For most medical services, payments are generally set in advance by
negotiation of rates between insurance providers and health care providers,
whereby health plans develop provider networks that offer consumers and
employers access to affordable, high-quality care. See AHIP, Center for Policy and
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Research, Charges Billed by Out-of-Network Providers: Implications for
Affordability, at 3 (Sept. 2015) (“AHIP Out-Of-Network Report”).9 The adequacy
of a plan’s provider networks must meet federal and/or state standards. See, e.g.,
42 U.S.C. § 18031(c)(1)(B) (requiring Secretary of Health and Human services to
set network-adequacy standards for certification as a “qualified health plan”); Nat’l
Conference of State Legislators, Insurance Carriers and Access to Healthcare
Providers: Network Adequacy (Nov. 2015) (surveying state laws).10
Such networks benefit consumers and the entire health care system by
reducing costs, promoting access to and utilization of services, and providing high-
quality choices for enrollees. See AHIP, What’s the Role of Networks in Providing
High-Quality Affordable Care?11; Patrick A. Rivers & Saundra H. Glover, Health
care competition, strategic mission, and patient satisfaction: research model and
propositions, 22 J. HEALTH ORGANIZATION MGMT. 627 (2008) (describing how
providers compete for inclusion in networks, which reduces costs and improves
quality). Networks operate to reduce costs for consumers because insurance
providers negotiate payments with providers up front, avoid the inefficiencies of
negotiating every bill, and verify the credentials of the providers for their enrollees.
9 Available at https://www.ahip.org/wp-content/uploads/2015/09/ OON_Report_11.3.16.pdf. 10 Available at http://www.ncsl.org/research/health/insurance-carriers-and-access-to-healthcare-providers-network-adequacy.aspx. 11 Available at https://www.ahip.org/issues/provider-networks/.
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The resulting contracts, moreover, generally prohibit surprise bills from in-network
providers and thereby limit consumers’ exposure to out-of-pocket costs. See 2019
GAO Report at 7; 2017 GAO Report at 7-8.
Health insurance providers have tried to take the same approach to air
ambulance services—seeking to contain costs and limit patient out-of-pocket
expenses by including air ambulance services in plan networks, while still
appropriately compensating air ambulance providers with rates exceeding other
payment sources (e.g., Medicare, Medicaid, and others). But such efforts have been
largely unsuccessful, and network participation rates remain low. See 2019 GAO
Report at 16 (reporting national data indicating only 31% of air ambulance
transports were in-network in 2017); Md. Health Care Comm’n, Air Ambulance
Study Required Under Senate Bill 770, at 2-3 (Dec. 2006) (“MHCC Report”)
(overall share of in-network air ambulance missions fell from 47% in 2004 to 27%
in 2005)12; 2017 GAO Report at 18 (representatives from three large independent
air ambulance providers noted that they do not generally contract with insurance
providers, with one stating that the company has contracts with fewer than 10 of
the approximate 1,000 private insurance payers it works with per year, or around
1%). At 69% in 2017, the out-of-network rate for air ambulance transports far
exceeds the rates for other emergency services. 2019 GAO Report at 16-17
12 Available at http://dlslibrary.state.md.us/publications/EXEC/DHMH/MHCC/ AirAmbulance_2006.pdf.
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(reporting 51% of ground ambulance transports and 22% of emergency room
physician services were out of network, with transports provided by municipal
agencies explaining much of the out-of-network rate for ground ambulances).
The inability to negotiate network rates ahead of time doesn’t mean,
however, that health insurance providers can refuse to cover the service.13 It
means only that they must pay more, when the unpredictable and unconstrained
bills finally arrive, and often more than their fair share. Private insurance providers
cover only about a third of total air ambulance patient transports across the
country, but provide the lion’s share of payments, as much as three quarters of
revenues for the largest national air ambulance providers. 2017 GAO Report at 14;
PHI, Inc., Annual Report (Form 10-K) 56 (Feb. 23, 2018) (reporting private
insurance accounted for 72% of revenue).14 This mismatch between patient volume
and revenues occurs because commercial health insurance providers typically
reimburse air ambulances at higher rates than other payment sources (like
Medicare), often because they are reluctant to expose their plan participants to
surprise medical bills. U.S. GOV’T ACCOUNTABILITY OFFICE, GAO-10-907, AIR
AMBULANCE: EFFECTS OF INDUSTRY CHANGES ON SERVICES ARE UNCLEAR 5
13 Covering air ambulances is generally mandatory for plans subject to the Affordable Care Act’s rules regarding essential health benefits. See 42 U.S.C. § 18022(b)(1)(B) (requiring coverage of “emergency services”). 14 Available at http://www.phihelico.com/docs/Investor%20Relations/2017/ 2017%20Annual%20Report.pdf.
19
(2010). The following chart prepared by the GAO illustrates the range of payments
made by private insurance compared to other payers, and demonstrates that private
insurance providers (and their enrollees) are paying far more than their fair share
for air ambulance services:
2017 GAO Report at 14.
For the most part, these higher payments from private insurance providers
(and their enrollees, the patients) are extracted through post-service negotiations.
But when insurance providers can negotiate contracts with air ambulance providers
ex ante by including them in plan networks, patients pay far less for those services,
while air ambulances are still generally compensated at a higher rate than they are
20
by other payers. For example, testimony before the North Dakota legislature
indicated that charges from out-of-network air ambulance services were on average
240% higher than in-network providers’ charges. See AHIP Issue Brief at 6;
accord MHCC Report at 35 (2005 study showing in-network charges for air
ambulance providers, although substantially higher than Medicare-allowed
amounts, were still significantly less than out-of-network charges). Network
agreements also protect consumers from surprise medical bills for whatever
portion of the service bill is not covered by the health plan, thereby limiting
consumers’ exposure to out-of-pocket costs. 2019 GAO Report at 7; 2017 GAO
Report at 8.
Participation in networks would lower costs for insurance providers and
consumers, and protect consumers from surprise medical bills, all while still
reimbursing air ambulance providers at higher rates than any other market
participant. But because no regulation constrains their ability to send surprise
medical bills or requires them to maintain transparent pricing, most air ambulances
simply opt out. See 2019 GAO Report at 8 (describing lack of incentives to
participate in networks); Missouri Report at 5 (“[M]any air ambulance providers,
particularly providers not affiliated with a hospital, do not participate in insurer
networks and have little incentive to do so.”); MHCC Report at 30–31 (noting that
air ambulance providers cite lower reimbursement rates and requirement to forgo
21
surprise medical billing as reasons for resistance to network participation).
2. The ability to send surprise medical bills and the lack of pricing transparency tip the scales of post-service negotiations in favor of exceptionally high bills for air ambulance services.
The same market and regulatory conditions that allow air ambulance
providers to opt out of plan networks without losing market share also enable them
to extract exorbitant payments in post-service negotiations with insurance
providers. When patients use an air ambulance that is out-of-network, they have no
choice or consent in the matter because network status is (sensibly) not a factor in
air ambulance dispatch. 2019 GAO Report at 7. The out-of-network provider then
typically submits an unsubstantiated and unreasonably high billed charge, and the
insurance provider must engage in post-service negotiations with the air ambulance
provider about how much to pay for the service. See AHIP Out-Of-Network Report
at 2 (a study of out-of-network charges for a variety of procedures (but not
specifically air ambulances) indicated average out-of-network charges ranging
from 118% to 1382% of the Medicare reimbursement rate).
Health insurance providers regularly engage in post-service negotiations
with a wide variety of medical providers. With other emergency services, however,
regulatory guardrails for post-service negotiations foster pricing transparency and
protect patients from surprise medical billing. See Kaiser Family Foundation,
Private Insurance: Surprise Medical Bills (Mar. 2016) (surveying different state
22
approaches to mitigating unfair, excessive out-of-network charges).15 But because
air ambulance providers operate in a regulatory vacuum, they have
disproportionate leverage in such negotiations for several reasons. First, as
described above, very few air ambulance providers are contracted with health
plans, so although one common way to resolve payment of out-of-network services
is to offer the same rate that health plans use for in-network providers, cf. 45
C.F.R. 147.138(b)(3)(i)(A) (using in-network payments as one possible minimum
payment standard for out-of-network emergency services), an insurance provider
may not have in-network air ambulance payments to use as reference points.
Second, very little information is known about air ambulance cost data and
their charges are opaque. 2017 GAO Report at 19-20; NCOIL Minutes at 2-3. Yet
efforts to require even something so basic as a published charge list have been held
invalid under the Airline Deregulation Act. See Valley Med Flight, Inc., 171 F.
Supp. 3d at 942. Consequently, there is a general lack of comparative market data
on what charges are reasonable.
Finally, and most critically, air ambulances can threaten to bill the patient
for any amount not paid by the health plan. 2017 GAO Report at 7. Surprise
medical billing is an especially important driver of unconstrained air ambulance
charges. Insurance providers want to protect their enrollees—who pay insurance
15 Available at https://www.kff.org/private-insurance/issue-brief/surprise-medical-bills/.
23
premiums precisely to avoid unanticipated and financially-devasting medical
costs—from nonetheless being charged outrageous balances. So they often reach
an agreement that will satisfy the air ambulance provider. And they do so even if it
means paying an unsubstantiated charge that is inflated well above what insurance
providers would consider to be the usual and customary charge for the service.
Moreover, air ambulance providers know that surprise medical billing provides
them this negotiating leverage. Members of the industry reported to the GAO that
after sending a surprise medical bill, “they first encourage patients to appeal to
their insurers for increased payment.” 2019 GAO Report at 19; see also 2017 GAO
Report at 18 (noting that a patient receiving a surprise medical bill will frequently
report it to her insurance provider, and that “often” results in a higher payment to
the air ambulance provider). In other words, air ambulance providers have no
qualms about placing the patient in the middle as a means to extract inflated
payments from health insurance providers. This practice would never occur in the
market for commercial air transport—where consumer demand is highly elastic,
customers can readily comparison shop, and there is no insurance provider to
leverage—because a consumer’s need for commercial air travel is both knowable
and controllable and not a risk they insure against.
Despite these critical differences, and the distinct role insurance markets
play in the provision of air ambulance services, state efforts to sensibly address this
24
problem have been routinely defeated as preempted by a federal statute meant to
promote competition for commercial airlines. But air ambulances and commercial
airlines are nothing alike. So instead of fostering competition, the result of this
overly broad reading of the preemptive scope of the Airline Deregulation Act has
been to impede competition for air ambulance services.
3. Air ambulances’ refusal to participate in networks and heightened post-service leverage has resulted in skyrocketing costs for insurance providers and consumers.
Because of these anticompetitive dynamics, billed charges and revenue in
this skewed market have soared. The median bill for a fixed-wing transport in 2017
was $40,600—up 60% from $24,900 just five years earlier. 2019 GAO Report at
17. The average bill per transport for the largest air ambulance provider—Air
Methods—increased from $13,000 in 2007 to $49,800 in 2016. 2017 GAO Report
at 11; see also Sarah Gantz, Sky high air ambulance bills leave patients seeking
relief, BALT. BUS. J. (Aug. 28, 2015) (reporting that one air ambulance provider’s
average bill increased to $41,803 in Maryland in 2014, up from $17,796 in 2013).16
And although little data is known—given States’ frustrated attempts to
impose transparency—the few estimates available suggest that these billed charges
far exceed costs. Peter Eavis, Air Ambulances Offer a Lifeline, and Then a Sky-
High Bill, N.Y. TIMES (May 5, 2015) (reporting estimates for the average cost of
16 Available at https://www.bizjournals.com/baltimore/print-edition/2015/08/28/sky-high-air-ambulance-bills-have-patients-seeking.html.
25
each flight ranging from $7,400 to $9,000 or $10,000).17 The district court found
here that Guardian Flight charges private insurance providers—and their
enrollees—far more than their costs in order to cover services provided to others
(i.e., uninsured, Medicare, and Medicaid patients). JA 88 (The “cost of
undercompensated care is shifted to and borne by … commercial insurers and
patients.”). That pattern is widespread. One air ambulance provider informed
reporters that it “routinely charges patients far more than the actual cost for a flight
in order to make up for low government reimbursements” from Medicare,
Medicaid, and similar programs. Cindy Galli et al., Sky-Rage: Bills, Debt, Lawsuits
Follow Helicopter Medevac Trips, ABC NEWS (Mar. 16, 2016)18; see also N.M.
Office of Superintendent of Ins., Air Ambulance Memorial: Study Report, at 5 (Jan.
2017) (air ambulance provider reporting same to state regulator).19
But if the problem is that federal reimbursements are too low, the answer is
surely to press the federal government for higher reimbursements, not to recoup the
federal underpayment by sending inflated surprise medical bills to patients—all the
while aggressively fending off any attempt by States to reasonably regulate air
ambulance payments. Through widespread use of surprise medical bills, high
17 Available at http://www.nytimes.com/2015/05/06/business/rescued-by-an-air-ambulance-but-stunned-at-the-sky-high-bill.html. 18 Available at http://abcnews.go.com/US/sky-rage-bills-debt-lawsuits-follow-helicopter-medevac/story?id=37669153. 19 Available at http://www.osi.state.nm.us/MiscPages/docs/newsroom/ Air%20Ambulance%20Memorial%20-%201.19.17.pdf.
26
payments are often demanded directly from vulnerable consumers who are
recovering from critical medical injuries and illnesses. See Alison Kodjak, Taken
for a Ride, NPR (Sept. 25, 2018) (reporting patient was first called by air
ambulance provider three days after an accident, while he was still in the hospital,
and told “the helicopter ride would most likely cost more than $50,000 and asked
… how he planned to pay”).20 In North Dakota, surprise medical bills as high as
$66,600 are reflected in complaints, 2019 GAO Report at 18, and testimony
presented in the legislature indicated that one health plan experienced more than
160 cases over a twelve-month period where its enrollees were sent surprise bills
for air ambulance services ranging from $20,000 to $30,000, AHIP Issue Brief at
5-6.
North Dakota’s experience is not unique. A recent review of surprise-
medical-billing complaints in Maryland revealed bills ranging from $12,300 to
$52,000. 2019 GAO Report at 18. A study by a Montana legislative committee
found that surprise bills for air ambulances in that state “amounted to $25,000 at
the low end to more than $50,000,” and in one case, more than $100,000. Mont.
State Leg., Final Report of the 2015-2016 Economic Affairs Interim Committee, at
4 (May 2017) (“Montana EAIC Report”). And documents from nine States reveal
that from 2013 to 2016, state “insurance departments reviewed 55 incidences in
20 https://www.npr.org/sections/health-shots/2018/09/25/647531500/taken-for-a-ride-doctor-injured-in-atv-crash-gets-56-603-bill-for-air-ambulance.
27
which consumers complained of $3.8 million in combined charges—an average
charge of $70,000 per trip.” Eric S. Peterson & Brian Maffly, Sky’s the Limit for
What Utah Air Ambulances Can Charge—Like the $46K Bill This Man Received
for a 50-mile Trip, SALT LAKE TRIB. (Aug. 29, 2016).21
Despite insurance providers’ best efforts to negotiate better rates, sky-high
surprise medical bills can still cause numerous difficulties for consumers.
Testimony in Montana indicated that some consumers were forced to sign over
pensions or sign up for long-term payment plans. Montana EIAC Report at 55.
Others must deal with aggressive collection tactics, including use of debt
collectors, threatening letters, wage garnishment, and lawsuits. See Eavis, supra;
Galli, supra. According to a 2016 news report, one air ambulance provider has
filed hundreds of debt collection lawsuits against individual patients over the
previous five years, including 104 lawsuits in South Carolina alone. Galli, supra. A
report from a Missouri agency determined, based on court records, that “[m]any air
ambulance providers have adopted fairly aggressive collection strategies, such as
placing liens on homes or garnishing wages,” reporting over 180 cases involving a
single air ambulance provider over a six-year period, most of which involved
collection efforts. Missouri Report at 6. The widespread harm from such predatory
tactics cries out for sensible regulatory approaches.
21 Available at http://archive.sltrib.com/article.php?id=4139196&itype=CMSID.
28
* * * * *
Consumers cannot be protected from these harms without some regulatory
oversight of air ambulance services. And federal advisory studies alone are not
enough. The States have a crucial role to play, as they do for every other type of
emergency medical service. When regulatory guardrails for the relationship
between out-of-network emergency providers and insurance providers are in place,
they help to correct market imbalances and allow insurance markets to operate as
they should—by facilitating health insurance providers’ efforts to compensate
providers fairly while protecting consumers from overwhelming and excessive
charges. And, when staying out-of-network is no longer an invitation to price
gouge, more emergency providers will be encouraged to join networks, rather than
abandon them, allowing insurance providers to better protect consumers and
provide affordable coverage through robust, quality networks. See 2019 GAO
Report at 22 (noting that when Montana passed a law restructuring post-service
negotiations for air ambulance services, “most air ambulance providers [were]
more willing to enter into contract negotiations with insurers” and consumer
complaints decreased). In other words, allowing States to fulfill their consumer
protection and insurance oversight role for the provision of essential medical
services fosters a virtuous cycle that reduces expenditures across the health care
system, benefits and protects consumers, and fairly compensates providers for the
29
costs of the urgently necessary, extremely important services they provide to
patients.
It is nonsensical that this one small piece of the emergency medical service
system—air ambulances—has been placed beyond the scope of the States’
traditional and well-established ability to comprehensively oversee insurance
coverage for emergency medical services. This absence of regulatory oversight,
combined with the highly inelastic demand for emergency medical care and a lack
of other traditional, market-driven restraints on pricing, allows air ambulance
providers to engage in unfair practices that result in increased health care costs for
everyone.
CONCLUSION
The judgment of the district court with respect to the Claims Settlement
Provision, N.D.C.C. § 26.1-47-09(3), should be reversed.
June 14, 2019 Respectfully submitted,
s/Hyland Hunt Julie Simon Miller Thomas M. Palumbo AMERICA’S HEALTH INSURANCE PLANS 601 Pennsylvania Ave. NW South Building, Suite 500 Washington, DC 20004
Hyland Hunt Ruthanne M. Deutsch DEUTSCH HUNT PLLC 300 New Jersey Ave. NW Suite 900 Washington, DC 20001 Tel.: 202-868-6915 Fax: 202-609-8410 Email: [email protected]
Attorneys for Amicus Curiae America’s Health Insurance Plans
CERTIFICATE OF COMPLIANCE
The foregoing brief is in 14-point Times New Roman proportional font and
contains 6,261 words, and thus complies with the type-volume limitation set forth
in Rules 29(a)(5) and 32(a)(7)(B) of the Federal Rules of Appellate Procedure.
s/Hyland Hunt Hyland Hunt
June 14, 2019
CERTIFICATE OF SERVICE
I hereby certify that, on June 14, 2019, I served the foregoing brief upon all
counsel of record by filing a copy of the document with the Clerk through the
Court’s electronic docketing system.
s/Hyland Hunt Hyland Hunt