Eaglemed LLC v. Cox , 868 F.3d 893 ( 2017 )

FILED
United States Court of Appeals
Tenth Circuit
August 22, 2017
PUBLISH Elisabeth A. Shumaker
Clerk of Court
UNITED STATES COURT OF APPEALS
TENTH CIRCUIT
EAGLEMED LLC, a Delaware limited
liability company; MED-TRANS
CORPORATION, a North Dakota
corporation; AIR METHODS
CORPORATION, a Delaware
corporation; ROCKY MOUNTAIN
HOLDINGS LLC, a Delaware limited
liability company,
Plaintiffs - Appellees,
v. No. 16-8064
JOHN COX, in his official capacity as
Director of Wyoming Department of
Workforce Services; JOHN
YSEBAERT, in his official capacity as
Administrator of the Wyoming
Department of Workforce Services,
Office of Standards and Compliance;
PETE SIMPSON, in his official
capacity as Senior Management
Consultant and Deputy Administrator,
Provider Services of the Wyoming
Department of Workforce Services,
Workers’ Compensation Division,
Defendants - Appellants.
___________________________
TEXAS MUTUAL INSURANCE
COMPANY,
Amicus Curiae.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF WYOMING
(D.C. No. 2:15–CV–00026–ABJ)
Timothy W. Miller, Senior Assistant Attorney General (Peter K. Michael,
Attorney General; Daniel E. White, Deputy Attorney General; and Charlotte M.
Powers, Assistant Attorney General, with him on the briefs), Cheyenne,
Wyoming, for Defendants-Appellants.
George W. Hicks, Jr., of Kirkland & Ellis, LLP, Washington, DC (Christina F.
Gomez, Matthew J. Smith, and Jessica J. Smith of Holland & Hart LLP, Denver
Colorado; Michael P. Manning of Holland & Hart LLP, Billings, Montana; and
Richard A. Mincer and Khale J. Lenhart of Hirst Applegate LLP, Cheyenne,
Wyoming, on the brief) for Plaintiffs-Appellees.
Matthew Baumgartner and P.M. Schenkkan of Graves, Doughtery, Hearon &
Moody, P.C., Austin, Texas, filed an amicus curiae brief for Texas Mutual
Insurance Company.
Before LUCERO, McKAY, and BACHARACH, Circuit Judges.
McKAY, Circuit Judge.
Defendants—various officials at the Wyoming Department of Workforce
Services—appeal the district court’s entry of a permanent injunction related to the
Department’s payment for air-ambulance services rendered to ill or injured
individuals covered by the Wyoming Worker’s Compensation Act. 1 In its initial
1
Plaintiffs brought this lawsuit against additional defendants as
well—specifically, the State of Wyoming and the Workers’ Compensation
Division of the Department of Workforce Services. The district court dismissed
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judgment, the district court held that the Department’s setting of a rate schedule
for its payment for such services was preempted by the Airline Deregulation Act,
and the court enjoined Defendants from enforcing both the rate schedule and the
state statute which requires the Department to pay for ambulance services at a
reasonable rate not to exceed the maximum rates set forth in the schedule. After
Defendants took the position that preemption of the statute removed any statutory
basis for the Department to pay air ambulances from the state workers’
compensation 2 fund at all, the district court entered an amended judgment
permanently requiring Defendants to pay the full amount charged for all air-
ambulance services, whatever that amount might be, in the future. On appeal,
Defendants challenge both the district court’s legal holding on the preemption
question and the scope of the injunctive relief ordered in the amended judgment.
I.
The Wyoming Worker’s Compensation Act is “the legislative embodiment
of a compromise between employers and employees who recognized the need for
the State and the Division based on their sovereign immunity, and this decision is
unchallenged on appeal. We use the term “Defendants” in this opinion to refer
only to those Defendants who are involved in this appeal.
2
We note that, although the state statute places the possessive apostrophe
between the “r” and the “s” in “worker’s,” see Wyo. Stat. Ann. § 27-14-101(a),
the Department of Workforce Services’ Workers’ Compensation Division uses the
plural form of “workers’ compensation” both in its name and in its official
documents. We shall follow Wyoming’s inconsistent lead in this opinion, using
the singular form when naming the Act and otherwise using the plural form.
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a new system to compensate employees for employment-related injuries without
the employee having to rely upon tort concepts.” Baker v. Wendy’s of Mont., Inc.,
687 P.2d 885, 887 (Wyo. 1984). The Act provides mandatory coverage for all
workers employed in several sectors of employment which are deemed to be
extrahazardous in nature, and it also covers other employees whose employers
elect to participate in the Act. Employers of covered workers must contribute to
the state workers’ compensation account, and in return they are provided with
immunity from the tort claims that could otherwise have been brought against
them. As for covered employees, “[i]n return[] for relinquishing their right to
common-law actions against the employers when there was cause therefor in
event of work-related injuries, the employees receive[] speedy relief for such
injuries, regardless of lack of fault on the part of the employer and without cost
and delay attendant to legal action.” Meyer v. Kendig, 641 P.2d 1235, 1238
(Wyo. 1982). As the Wyoming Supreme Court has described it, the Act
“establish[ed] an industrial-accident fund—financed by industry and underwritten
by the State—from which the families of deceased employees and employees
injured while engaged in extrahazardous employment would be compensated
according to amounts previously determined by the legislature.” Hamlin v.
Transcon Lines, 697 P.2d 606, 615 (Wyo. 1985). Employers’ contributions to the
workers’ compensation fund are “accumulated, paid into the state treasury and
maintained in such manner as may be provided by law.” Wyo. Const. art. 10, § 4.
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The Wyoming Department of Workforce Services, and specifically the
Workers’ Compensation Division of the Department, is charged with managing
the workers’ compensation fund and paying covered compensation from the fund.
The program is required to be “neither more nor less than self-supporting,” Wyo.
Stat. Ann. § 27-14-201(a), and the Division is tasked with ensuring both that the
employers’ contributions are fixed “at the lowest rate consistent with the
maintenance of an actuarially sound worker’s compensation account,” id. § 27-14-
201(c), and that the amounts paid for workers’ medical and related costs are
reasonable, id. § 27-14-401. Indeed, the statute provides that “[n]o fee for
medical or hospital care under this section shall be allowed by the division
without first reviewing the fee for appropriateness and reasonableness in
accordance with its adopted fee schedules.” Id. § 27-14-401(b).
The Act contains a single provision that pertains to the payment of costs
associated with ambulance services. Section 27-14-401(e) provides: “If
transportation by ambulance is necessary, the division shall allow a reasonable
charge for the ambulance service at a rate not in excess of the rate schedule
established by the director under the procedure set forth for payment of medical
and hospital care.” In accordance with this statute, the Division has established a
rate schedule for both ground- and air-ambulance services. This rate schedule
provides, for instance, that the maximum reimbursement for transportation in a
rotary-wing air ambulance is $3,900.66 plus $27.47 per statute mile. See Rules,
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Regulations & Fee Schedules of the Wyo. Workers’ Safety & Comp. Div. Ch. 9.
The “procedure set forth for payment of medical and hospital care,” incorporated
by reference in Section 27-14-401(e), is established in Section 27-14-501(a).
This section provides in part: “Within thirty (30) days after accepting the case of
an injured employee and within thirty (30) days after each examination or
treatment, a health care provider or a hospital shall file without charge a written
medical report with the division. . . . Fees or portions of fees for injury related
services or products rendered shall not be billed to or collected from the injured
employee.”
Plaintiffs are several companies which provide air-ambulance services in
Wyoming. In this lawsuit, Plaintiffs sought declaratory and injunctive relief
against Defendants, arguing that the federal Airline Deregulation Act, 49 U.S.C.
§§ 1371 et seq., preempts Section 27-14-401(e) and the associated rate schedule
because they impermissibly regulate the price of air-ambulance services. On
cross-motions for summary judgment, the district court agreed “that the Airline
Deregulation Act preempts Wyoming Statute section 27-14-401(e) and Chapter 9,
Section 8 of the Rules, Regulations and Fee Schedules of the Wyoming Workers’
Compensation Division to the extent the statute and regulation set compensation
that air ambulances may receive for their services.” (Appellants’ App. at 416.)
The court accordingly entered an injunction against Defendants which
“permanently enjoined [them] from enforcing Wyoming Statute Section 27-14-
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401(e) and Chapter 9, Section 8 of the Rules, Regulations and Fee Schedules of
the Wyoming Workers’ Compensation Division against air ambulance services.”
(Id. at 418.)
Defendants then filed a motion for a stay pending appeal in which they took
the position that this injunction, by prohibiting them from enforcing the statute
which provided for the reimbursement of air ambulances, prevented them from
paying air-ambulance workers’ compensation claims at all. Plaintiffs argued in
response that the state statute should be preempted only in part, with the statute
being read to strike both the word “reasonable” from the description of the
allowed claims and the limitation on reimbursement to “a rate not in excess of the
rate schedule established by the director under the procedure set forth for
payment of medical and hospital care.” Thus, Plaintiffs argued that the statute
should be interpreted to require the Division to pay all charges, at whatever rate
and however unreasonable, that would thereafter be submitted to the Division for
air-ambulance claims. The district court agreed, entering an amended judgment
which ordered “the named state officials and their employees and agents . . . to
compensate air ambulance entities the full amount charged for air ambulance
services.” (Id. at 478.) Defendants appeal this decision as well as the district
court’s underlying preemption holding.
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II.
“While we typically review a district court’s grant of an injunction for
abuse of discretion, we review de novo a summary judgment which serves as a
basis for an injunction.” United States v. Hartshorn, 751 F.3d 1194, 1198 (10th
Cir. 2014) (internal quotation marks and brackets omitted). “We review the grant
of summary judgment de novo, construing all evidence and drawing any
inferences in a light most favorable to the party opposing summary judgment.”
SEC v. Pros Int’l, Inc., 994 F.2d 767, 769 (10th Cir. 1993). After reviewing the
legal issues involved in the entry of summary judgment de novo, “we review the
district court’s grant or denial of a permanent injunction for abuse of discretion,”
id., “and we have authority to modify an injunction if it is overbroad,” United
States v. Jenks, 22 F.3d 1513, 1519 (10th Cir. 1994).
In their opening brief, Defendants raise two arguments as to why the
district court erred in holding on summary judgment that the state statute and rate
schedule are preempted by the Airline Deregulation Act. First, Defendants argue
that this legal conclusion was erroneous because the state statutory scheme is not
compulsory, but rather presents air-ambulance providers with the contractual
option to either obtain reimbursement from the Division at the specified rates or
to seek payment from the injured Wyoming worker directly. Defendants argue
that the state statute and rate schedule are accordingly not “state-imposed
obligations,” but are instead “privately ordered obligations” free from preemption
-8-
under the Airline Deregulation Act. See Am. Airlines v. Wolens, 513 U.S. 219,
228–29 (1995). Second, Defendants argue that the preemption question could not
be resolved on summary judgment because there is a material dispute of fact as to
whether the Wyoming state and rate schedule actually have a significant and
adverse effect on Wyoming air-ambulance prices. In addition to these two
arguments, additional arguments against preemption were raised in the amicus
curiae brief filed by Amicus Texas Mutual Insurance Company, which
Defendants’ reply brief adopts by reference. We consider the two arguments
raised by Defendants’ opening brief first, then turn to the amicus arguments.
The Airline Deregulation Act’s preemption provision states in pertinent
part that “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 Supreme Court has explained that this provision expresses “a
broad pre-emptive purpose” and will preempt any “[s]tate enforcement actions
having a connection with, or reference to, airline ‘rates, routes, or services.’”
Morales v. Trans World Airlines, Inc., 504 U.S. 374, 383–84 (1992). However,
the preemption clause does not “shelter airlines from suits alleging no violation of
state-imposed obligations, but seeking recovery solely for the airline’s alleged
breach of its own, self-imposed undertakings.” Wolens, 513 U.S. at 228. Thus, in
Wolens the Court held that while claims brought under a state Consumer Fraud
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Act were preempted by § 1305(b)(1), the plaintiffs’ breach-of-contract claims
were not preempted because these claims simply sought to enforce the “privately
ordered obligations” that the airline voluntarily agreed to, not state-imposed
obligations.
Defendants argue that the Wyoming statute and rate schedule at issue in
this case likewise set forth privately ordered contractual obligations that the air
ambulances voluntarily agree to when they present claims for reimbursement to
the Workers’ Compensation Division. Defendants contend that air-ambulance
companies are free to either submit a bill to the Division for reimbursement at the
rates established in the rate schedule, agreeing in return not to bill any remaining
unpaid amounts to the injured worker, or to submit the entire bill to the injured
worker for payment. To support this argument, Defendants cite to Section 27-14-
401(e), which provides: “If transportation by ambulance is necessary, the
division shall allow a reasonable charge for the ambulance service at a rate not in
excess of the rate schedule . . . .” Defendants argue that because this statute
mentions only a payment duty on the part of the Division and does not
affirmatively regulate the actions of ambulance companies, the statute must be
interpreted as allowing ambulance companies to seek payment outside the
strictures of the Worker’s Compensation Act if they wish to do so. Defendants
also cite to Section 27-14-501(a), which provides in part that “[w]ithin thirty (30)
days after accepting the case of an injured employee and within thirty (30) days
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after each examination or treatment, a health care provider or a hospital shall file
without charge a written medical report with the division. . . . Fees or portions of
fees for injury related services or products rendered shall not be billed to or
collected from the injured employee.” Defendants contend that an air-ambulance
provider does not “accept[] the case of an injured employee” until the provider
chooses to present a claim to the Division, and it is only then, Defendants
contend, that the remainder of the statute kicks in and prohibits the provider from
billing the injured employee for the expenses incurred. Thus, Defendants contend
that the statute presents air-ambulance providers with a contractual offer to
receive payment from the Division at the rates established in the rate schedule,
which the providers may freely accept or reject at their discretion.
We find this argument to be unpersuasive. First, we note that the other
reimbursement provisions in Section 27-14-401 likewise speak in terms of the
Division’s payment responsibilities and do not expressly regulate the providers of
medical or other services themselves. Thus, Defendants have presented no
principled reason why we could read the statute to treat air-ambulance companies
any differently from any other providers of medical or related services, and our
interpretation of the statute as it relates to air-ambulance providers would apply
with equal force to all in-state providers of medical or related services to injured
workers. With this fact in mind, we further note that there is nothing in the
language of either of the provisions cited by Defendants which suggests that it
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was intended to establish a contractual offer that could be freely accepted or
rejected at the will of the ambulance company or other health-care provider.
Rather, the language of these provisions suggests that they are intended to
establish a universally applicable system for managing all in-state workers’
compensation claims. Moreover, while another provision in the statute allows the
Division to “negotiate with out-of-state health care providers regarding the
payment of fees for necessary medical care to injured workers,” Wyo. Stat. Ann.
§ 27-14-401(g), there are no statutory provisions suggesting that the state has
granted the Division the authority to enter into similar contracts with in-state
providers, much less any statutory provisions suggesting that the entire workers’
compensation system is intended to work as a voluntary contractual offer for
medical providers to opt into compensation from the Division at set rates in
exchange for giving up their right to bill injured workers directly for the full
amount of their claims.
Defendants also rely on a provision in the Rules, Regulations and Fee
Schedules of the Wyoming Workers’ Compensation Division which provides that
“[r]equests for reimbursement may be submitted to the Division by an injured
worker for expense paid out-of-pocket for medical service(s) deemed reasonable,
necessary and directly related to his work-related injury on a form provided by
the Division.” Rules Wyo. Dep’t of Workforce Servs, Workers’ Comp. Div., ch.
7, § 3(a)(iii). They argue that this provision proves that ambulance companies
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and health-care providers may opt to bill workers directly for the full amount of
the charged expenses rather than proceeding under the Worker’s Compensation
Act to receive payment from the Division at the rates set in the rate schedules.
We are not persuaded that a provision allowing workers to submit requests for
reimbursement to the Division proves that ambulance and medical providers may
choose at will to opt out of the Act and directly bill workers for the full amount of
their transportation and health-care claims. Among other problems with this
interpretation, Defendants do not explain what the reimbursement rates for such
directly billed ambulance and medical claims would be—either the Division
would reimburse only the amounts provided by the rate schedule, which would
potentially leave workers facing extensive personal liability for charges in excess
of the scheduled rates, or the Division would be required to pay much more for
charges directly billed to workers than the scheduled rates allow, which, as
Defendants themselves argue, would exceed the Division’s powers as authorized
by the Wyoming legislature. Either way, this interpretation would be contrary to
the Act’s purposes. There may occasionally be situations in which a worker pays
for medical services out-of-pocket, and this rule establishes what will happen in
such a situation. It does not grant ambulances, medical professionals, and
hospitals the right to seek full reimbursement of all claimed charges from the
injured worker in every workers’ compensation case.
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Defendants’ reading of the statute and related regulations would remove
many of the protections provided to injured workers by the Act, exposing them to
potentially enormous medical bills from any medical or related provider who was
unhappy with the state’s reimbursement rates, and it is directly contrary to the
Wyoming Supreme Court’s directive that the Act “should be applied in favor of
the workman to the end that industry, not an individual, bears the burden of an
accident and injury that has occurred within the industrial setting.” Wright v.
State ex rel. Wyo. Workers’ Safety & Comp. Div., 952 P.2d 209, 212 (Wyo. 1998).
We see no basis in the statutory text for such a result, and we accordingly reject
Defendants’ argument that the statute simply provides air-ambulance providers
with the voluntary option to obtain reimbursement from the Division at the
scheduled rates in lieu of pursuing the full amount of the claim against the injured
worker directly. While such a system might perhaps be an effective way for a
state to structure its payments of air-ambulance workers’ compensation claims
without running afoul of the Airline Deregulation Act—a question we do not here
reach—the Wyoming statute as it currently exists simply does not establish a
voluntary contractual relationship, and thus Defendants’ reliance on Wolens is
unavailing.
Defendants’ second argument against preemption is that the district court
could not decide the preemption question on summary judgment because there is a
material dispute of fact as to whether the Wyoming statute actually affects the
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rates of air-ambulance services in Wyoming. This argument is defeated by the
very cases Defendants cite to support it. For instance, Defendants cite to Travel
All Over the World v. Saudi Arabia, in which the Seventh Circuit rejected a
preemption argument for state-law slander and defamation claims that did not
either “expressly refer to airline rates, routes or services,” or “have [a] forbidden
significant economic effect on airline rates, routes, or services.” 73 F.3d 1423,
1433 (7th Cir. 1996) (internal quotation marks and brackets omitted). As this and
other cases make clear, however, the court only needs to decide whether a
particular state law or claim has a “forbidden significant economic effect on
airline rates, routes, or services” when the state law at issue does not “expressly
refer to airline rates, routes or services” itself. Id. (internal quotation marks and
brackets omitted); see also, e.g., 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.”). The state
statute and rule at issue in this case expressly establish a mandatory fixed
maximum rate that will be paid by the State for air-ambulance services provided
to injured workers covered by the Worker’s Compensation Act, and thus the
district court did not need to also decide whether the statute and rule also had a
significant economic effect on airline rates, routes, or services.
We turn then to the arguments raised in the amicus brief. Plaintiffs argue
that we should not consider these arguments because they were not raised in
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Defendants’ opening brief and we generally will not “reach out to decide issues
advanced not by the parties but instead by amicus.” Tyler v. City of Manhattan,
118 F.3d 1400, 1404 (10th Cir. 1997). However, we have recognized that one of
the situations in which consideration of an amicus argument may be appropriate is
when “a party attempts to raise the issue by reference to the amicus brief.” Id.
Here, Defendants’ reply brief adopts all of the amicus arguments by reference.
Moreover, we note that Plaintiffs were provided with the opportunity to address
all of the amicus arguments in their expanded answer brief, and thus the issues
before us have received the benefit of the adversarial briefing process.
Particularly in light of the importance and the unsettled nature of the legal issues
before us, we conclude that it is appropriate for us to exercise our discretion in
this case to consider the arguments raised in the amicus brief and adopted by
reference in Defendants’ reply brief.
The amicus brief raises two main arguments as to why we should find the
Wyoming statute and rate schedule not to be preempted by the Airline
Deregulation Act. First, Amicus argues that Congress did not intend to prevent
state workers’ compensation programs from regulating air-ambulance fees.
Second, Amicus argues that the McCarran–Ferguson Act protects Wyoming’s
workers’ compensation statute from federal preemption.
Amicus raises several policy-related reasons why we should conclude that
Congress did not intend to prevent state workers’ compensation programs from
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regulating air-ambulance fees. Amicus points out, for instance, that the market
for air-ambulance services is severely distorted based on the unique
circumstances surrounding these services. Unlike the typical commercial airline
flights that were the focus of the Airline Deregulation Act, air-ambulance flights
generally are not chosen by their passengers, are not paid in advance at an agreed-
to rate, and do not have prices that are determined in a free market of individual
consumer choice. As a general rule, air-ambulance services are not requested or
arranged by either the individuals who will receive the services or by the
insurance companies, governmental entities, or individuals who will ultimately
pay for them. Rather, air ambulances are called by medical professionals and
emergency first-responders who will neither receive nor pay for their services.
Their prices are determined only after the service has already been rendered—in
cases paid through Medicare or Medicaid, at prices established by government
rate schedules, and in cases paid through private insurance, usually at a price
negotiated between the air ambulance and the insurer. See United States
Government Accountability Office, Air Ambulance: Effects of Industry Changes
on Services are Unclear, GAO Report to Congressional Requesters at 6–7 (Sept.
2010). And, as for the significant proportion of individuals who are uninsured or
whose insurance will not cover any or a portion of such claims, these individuals
may be billed an extremely high amount that they would not have agreed to if
they had been both aware of the potential price and capable of making an
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informed decision as to their medical transport at the time the air-ambulance
service was arranged. See Schneberger v. Air Evac EMS, Inc., 2017 WL 1026012,
at *4–5 (W.D. Okla. 2017); see also M. Kit Delgado et al., Cost-Effectiveness of
Helicopter versus ground Emergency Medical Services for Trauma Scene
Transport in the United States, 62(4) Ann. Emerg. Med. 351, 352 (Oct. 2013)
(included in Appendix G to amicus brief) (“Furthermore, a systematic review has
shown that more than half of the patients flown [in air ambulances] have minor or
non-life-threatening injuries that would likely have similar outcomes if
transported by ground.”).
There is certainly some persuasive force to the amicus argument that
federal preemption of state regulations in this field is not serving the
congressional purpose of “further[ing] efficiency, innovation, and low prices” that
was a motivating force behind the Airline Deregulation Act, Morales, 504 U.S.
at 378 (internal quotation marks omitted). (See also R. at 324 (citing a New York
Times article which reported that the average Air Methods bill had increased from
$17,262 in 2009 to more than $40,000 by 2014, while Air Methods’ profits
surged).) Due to the Airline Deregulation Act’s broad preemption provision,
states have been unable to “prevent air ambulance service providers . . . from
imposing exorbitant fees on patients who wrongly assume their insurance will
cover the charges and are not in a position to discover otherwise” or engaging in
other unscrupulous pricing behaviors that would not be sustainable in a true free
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market but are easily perpetuated in the warped market of air-ambulance services.
Valley Med Flight, Inc. v. Dwelle, 171 F. Supp. 3d 930, 942 (D.N.D. 2016).
Amicus argues that surely Congress did not anticipate or intend such a result.
But when a statute contains an express preemption clause, “we do not
invoke any presumption against pre-emption but instead focus on the plain
wording of the clause, which necessarily contains the best evidence of Congress’
pre-emptive intent.” Puerto Rico v. Franklin Cal. Tax-Free, 136 S. Ct. 1938,
1946 (2016) (internal quotation marks omitted). And when the statute’s language
is plain, our inquiry into preemption both begins and ends with the language of
the statute itself. Id.
Neither Amicus nor Defendants have presented a single textual reason to
support the argument that the broad language of the Airline Deregulation Act’s
express preemption provision should not include air-ambulance services. Amicus
cites several policy reasons why it would make sense for air-ambulance services
to be excluded from federal preemption, but these policy reasons cannot trump the
plain language of the statute. And neither Amicus nor Defendants argue that air
ambulances are not “air carriers” under the statute, nor do they otherwise assert
that the plain language of the statute excludes air ambulances from its reach. Any
deficiency in the plain language of the statute or the scope of its coverage must be
corrected by Congress, not this court. “We cannot rewrite [an unambiguous
statute] to reflect our perception of legislative purpose.” Shady Grove Orthopedic
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Assocs. v. Allstate Ins., 559 U.S. 393, 403 (2010). Because air ambulances are
included within the broad language of the Airline Deregulation Act’s preemption
statute as it is currently written, we must reject Amicus’s policy-based reasons for
holding that the Wyoming statute and rate schedule should be exempted from
federal preemption in this case.
We turn then to the final argument raised against preemption in this
case—the amicus argument that the McCarran–Ferguson Act precludes federal
preemption of the state statute and rate schedule at issue here. The
McCarran–Ferguson Act provides in pertinent part: “No 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. Amicus argues that the McCarran–Ferguson Act is
applicable here because (1) some states operate their workers’ compensation
programs through a comprehensively regulated private insurance market, so the
laws regulating workers’ compensation in such states are laws “regulating the
business of insurance”; and (2) every state’s workers’ compensation laws should
accordingly be protected from inadvertent federal preemption in order to avoid
“creat[ing] an incongruous patchwork of preemption depending on how the
various states chose to implement workers’ compensation insurance.” (Amicus
Br. at 26.) Amicus makes no other attempt to argue that the Wyoming workers’
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compensation system regulates or even involves the business of insurance. We
are not persuaded that we should find the Wyoming statute to regulate the
business of insurance simply because other states have structured their workers’
compensation programs to operate through private insurance companies.
We note that Defendants argued in the district court proceedings that the
Wyoming workers’ compensation system is in effect a type of industrial-accident
insurance and thus that the Wyoming statute and fee schedule were protected by
the McCarran–Ferguson Act on their own merits and not just based on the way
other states have structured their workers’ compensation programs. However,
even if we were to accept the argument that Wyoming’s state-run workers’
compensation system establishes a type of insurance, we are not persuaded that
either Section 27-14-401(e) or its associated rate schedule are laws “regulating
the business of insurance.” In order for a state law to be precluded from federal
preemption under the McCarran–Ferguson Act, the law “must not just have an
impact on the insurance industry, but must be specifically directed toward that
industry.” Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 50 (1987). Moreover, the
state statute must be specifically directed toward “the ‘business of insurance,’”
not just “the business of insurance companies,” which means it must involve
something more than an insurance company’s agreement with medical providers
or pharmacies to fix prices. Group Life & Health Ins. Co. v. Royal Drug Co., 440
U.S. 205, 210–11 (1979). “[C]ost-savings arrangements may well be sound
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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 state statute and fee schedule at issue in this case do not serve to
underwrite or spread policyholders’ risks; rather, they “only minimize the costs
[the insurer] must incur to fulfill its underwriting obligations,” St. Bernard Hosp.
v. Hosp. Serv. Ass’n, 618 F.2d 1140, 1145 (5th Cir. 1980). As such, they do not
“regulat[e] the business of insurance” within the meaning of the
McCarran–Ferguson Act. See id.; see also, e.g., Genord v. Blue Cross & Blue
Shield of Mich., 440 F.3d 802, 808 (6th Cir. 2006) (holding that a state law
regulating reimbursement agreements between an insurer and medical providers
did not regulate the business of insurance); Valley Med Flight, 171 F. Supp. 3d at
943–45 (holding that a state statute establishing call lists for air-ambulance
providers based on their acceptance of reimbursement rates was preempted by the
Airline Deregulation Act and not subject to reverse preemption under the
McCarran–Ferguson Act because it did not regulate the business of insurance).
We therefore affirm the district court’s holding that Section 27-14-401(e)
and the associated rate schedule for ambulance services are preempted by the
Airline Deregulation Act to the extent that they set maximum reimbursement rates
for air-ambulance services provided to injured workers covered by the Wyoming
Worker’s Compensation Act.
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We turn then to Defendants’ challenge to the breadth of the injunctive
relief ordered. The district court concluded that, because the Airline Deregulation
Act preempted the State’s attempt to establish fixed maximum reimbursement
rates for air-ambulance carriers, then the Workers’ Compensation Division was
necessarily required to pay in full any amount charged to the Division by an air-
ambulance provider that transported a covered injured worker. The district
court’s amended judgment accordingly required Defendants to reimburse all air-
ambulance claims in full at whatever rate Plaintiffs chose to charge them. We
agree with Defendants that the district court abused its discretion in so holding.
In fashioning injunctive relief against a state agency or official, a district
court must ensure that the relief ordered is “no broader than necessary to remedy
the [federal] violation.” Toussaint v. McCarthy, 801 F.2d 1080, 1086–87 (9th
Cir. 1986) (citations omitted). Moreover, “[a] federal court may not enjoin a state
official to follow state law.” Id. “Fundamental precepts of comity and federalism
admit of no other rule.” Knop v. Johnson, 977 F.2d 996, 1008 (6th Cir. 1992).
In this case, the only federal violation that occurred was Wyoming’s
enactment and application of a statute which provided that ambulance providers,
including air-ambulance providers, would be reimbursed in accordance with a
fixed rate schedule. The injunctive relief ordered in the district court’s initial
judgment—enjoining Defendants from enforcing the preempted statute and rate
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schedule, as they related to air-ambulance claims—was sufficient to remedy this
federal violation.
The district court’s amended judgment, on the other hand, went well
beyond what was necessary to remedy the federal violation, placing an affirmative
duty on state officials to reimburse in full all air-ambulance claims submitted to
the Workers’ Compensation Division. However, any such possible duty would
exist as a creation only of state, not federal, law. Plaintiffs have not identified a
single provision in the Airline Deregulation Act or any other federal statute which
would require Defendants to make any payment of air-ambulance claims
whatsoever, much less payment at whatever rates Plaintiffs choose to charge
them. 3 The question of how Defendants should administer the state Worker’s
3
The district court held that Defendants must be required to pay air-
ambulance claims because the failure to pay these claims would illegally regulate
air-ambulance rates by setting an effective rate of zero dollars. The court erred in
so holding. Defendants’ decision not to pay these claims only affects the payment
of air-ambulance companies from state funds. It does not preclude air-ambulance
companies from seeking payment—at any rate—from the individuals who receive
their services. In effect, the district court concluded that the State was required to
have a statute providing for the payment of air-ambulance claims in order to
avoid illegally regulating air-ambulance rates. We see no merit to this
conclusion. Again, we reiterate that the Airline Deregulation Act does not impose
a duty on the State to pay air-ambulance claims. To the extent that a state has
undertaken to pay such claims for some or all of its citizens, it is state law, not
federal law, that governs such payment, and a state does not violate the Airline
Deregulation Act simply by declining to make such payments.
Perhaps the district court was concerned that Section 27-14-501(a) might be
read in the future to prevent air-ambulance companies from seeking
reimbursement from the workers themselves, thus preventing the companies from
receiving payment from their passengers as well as from the State. However, if
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Compensation Act without enforcing the preempted rate schedule against air-
ambulance carriers is a question of state law, and any duty to pay the claims
remains a state duty, not a federal duty.
Federal law establishes no duty for states to pay the air-ambulance claims
of injured workers who are covered by state workers’ compensation statutes. To
the extent that Defendants may be required to pay such claims, it is state law, not
federal law, that requires such action, and we reiterate that “[a] federal court may
not enjoin a state official to follow state law.” Toussaint, 801 F.2d at 1087. The
district court thus abused its discretion when it entered its amended judgment
requiring Defendants to reimburse in full all air-ambulance claims received by the
Division.
Finally, we briefly address Plaintiffs’ argument that the state statute must
be interpreted in such as way as to require the State to reimburse air-ambulance
claims because individual workers should not be left personally responsible for
enormous air-ambulance bills and air-ambulance companies should not have to
suffer financial losses from carrying injured workers who are unable to pay such
bills themselves. We recognize that such unfortunate consequences may arise due
to the ill-conceived intersection of the Airline Deregulation Act’s broad
this were to happen, then it would be Section 27-14-501(a) that would be illegally
regulating air-ambulance rates by preventing any recovery from air-ambulance
passengers, and the proper remedy would seem to be the preemption of this
statute, not the forced payment of air-ambulance claims from state coffers.
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preemption provision with states’ attempts to administer financially sound
workers’ compensation programs in the face of skyrocketing air-ambulance bills.
Such policy considerations, however, are beyond the purview of this court.
Policy arguments in favor of excluding air-ambulance providers from the scope of
the Airline Deregulation Act’s preemption provision must be addressed to
Congress, and policy or statutory arguments in favor of requiring Wyoming’s
Workers’ Compensation Division to reimburse air-ambulance providers for
transporting injured workers in Wyoming must be addressed to state officials, the
state legislature, or the state courts. The role of this court is simply to enforce the
plain language of the Airline Deregulation Act as it is currently written and to
ensure that the remedy ordered “does no more and no less” than correct the
violation of that federal act, Hoptowit v. Ray, 682 F.2d 1237, 1246 (9th Cir.
1982). The plain language of the Airline Deregulation Act requires us to hold
that the Wyoming Worker’s Compensation Act and rate schedule are preempted to
the extent that they set mandatory fixed rates for reimbursement of air-ambulance
claims. Principles of comity and federalism require us to limit the remedy
ordered to correct the federal violation without otherwise interfering in
Defendants’ interpretation of and application of state law. Our holding is so
limited.
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III.
We AFFIRM the district court’s legal ruling that Wyoming Statute Section
27-14-401(e) and its associated rate schedule are precluded to the extent that they
set forth a mandatory maximum reimbursement rate for air-ambulance claims.
We also AFFIRM the initial order of injunctive relief entered in the district
court’s initial judgment, permanently enjoining Defendants from enforcing the
rate schedule against air-ambulance services. We REVERSE the amended
judgment and the overbroad injunctive relief entered therein, leaving it for the
state officials to determine, as a matter of state law, how Wyoming can and
should administer its workers’ compensation program within the limitations set by
federal law.
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