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Guardian Flight LLC v. Godfread

United States District Court, D. North Dakota

January 14, 2019

Guardian Flight, LLC, Plaintiff,
v.
Jon Godfread, in his capacity as North Dakota Insurance Commissioner; Wayne Stenehjem in his capacity as North Dakota Attorney General, Defendants.

          ORDER ON MOTIONS

          DANIEL L. HOVLAND, CHIEF JUDGE

         Before the Court is the Plaintiff's Motion for Judgment on the Pleadings filed on March 2, 2018. See Doc. No. 10. The Defendants filed a brief in opposition to the motion and a cross-motion for judgment on the pleading or alternatively for summary judgment on March 23, 2018. See Doc. No. 14. On April 6, 2018, the Plaintiff filed a reply brief. See Doc. No. 19. The Plaintiffs also filed three notices of supplemental authority to which the Defendants filed one response. See Doc. Nos. 20, 24, 26, and 27. For the reasons set forth below, both motions are granted in part and denied in part.

         I. BACKGROUND

         A. THE PARTIES

         The Plaintiff Guardian Flight LLC (“Guardian Flight”) provides air ambulance services in North Dakota and many other states around the country. It is organized under the laws of Delaware and has its headquarters and principal place of business in Salt Lake City, Utah. Guardian Flight is the successor in interest to Valley Med Flight, Inc. (“Valley Med Flight”). On July 19, 2017, Valley Med Flight and several affiliated air ambulance companies were purchased by Air Medical Group Holdings, Inc. (“AMGH”). As of November 22, 2017, Valley Med Flight's North Dakota emergency air ambulance operations were transferred to Guardian Flight, and as of December 29, 2017, all related FAA Part 135 air ambulance operations were transferred to Guardian Flight. Guardian Flight is registered with the North Dakota Secretary of State to do business as Valley Med Flight.

         Defendant Jon Godfread is the North Dakota Insurance Commissioner. North Dakota law empowers the Insurance Commissioner to issue cease and desist orders respecting violations of Title 26.1, and to bring an action in state court to enjoin any acts or practices which are prohibited by Title 26.l. See N.D.C.C. §§ 26.1-01-03.1 and 26.1-01-03.2. The Insurance Commissioner may also seek administrative penalties for violations of Title 26.1. N.D.C.C. § 26.1-01-03.3.

         Defendant Wayne Stenehjem is the North Dakota Attorney General. He investigates and prosecutes any violations of state law, and is authorized by law ‘to institute and prosecute all cases in which the state is a party, whenever in their judgment it would be for the best interests of the state so to do.” N.D.C.C.. § 54-12-02.

         B. GUARDIAN FLIGHT AIR AMBULANCE SERVICES

         Guardian Flight is a federally regulated air carrier which provides air ambulance services in North Dakota and around the country. It maintains a fleet of air ambulances ready to promptly respond to medical emergencies, often in rural or remote locations that lack sophisticated medical services. Guardian Flight's air ambulances transport patients facing serious or life-threatening emergencies, while providing medical care during the flight.

         As an emergent care provider, Guardian Flight may be dispatched by first responders, the emergency department of a hospital, or by an attending physician. Guardian Flight does not self-dispatch. Where a covered hospital or attending physician orders a transport, the regulations and procedures set out by the Emergency Medical Treatment and Active Labor Act (“EMTALA”), 42 U.S.C. § 1395dd, generally apply. North Dakota regulations require air ambulances to provide adequate care when called in emergency situations. See N.D. Admin. Code§ 33-36-01-05(8), (12), (16). Under state law, air ambulance providers may only refuse care in specified non-emergent situations. See N.D.C.C. § 23-27-04.

         In keeping with federal and state law, Guardian Flight transports patients regardless of their insurance status or ability to pay. Air ambulance services are extremely expensive. The median price charged by air ambulance service providers nearly doubled between 2010 and 2014. The amount Guardian Flight is reimbursed for its services depends in part on the patient's insurance coverage and whether Guardian Flight is an in-network or out-of-network provider with a particular insurance company. Due to the nature of the need for an air ambulance, patients have little or no control over which air ambulance service provider is used. Medicaid and Medicare reimbursement rates are limited and substantially below Guardian Flight's billed charges. Similarly, Guardian Flight generally recovers very little from patients who are uninsured. The cost of undercompensated care is shifted to and borne by other payors such as commercial insurers and patients. The portion of the billed charges which are not covered by insurance, which can run into the tens of thousands of dollars, is ultimately the responsibility of the patient.

         These large and unexpected bills lead many patients to complain to the North Dakota Insurance Department. North Dakota has twice passed legislation in an attempt to remedy the problem. The first attempt was found to be preempted by the Airline Deregulation Act (“ADA”). See Valley Med Flight, Inc. v. Dwelle, 171 F.Supp.3d 930 (D.N.D. 2016). It is the second attempt, SB 2231, which is the subject of this declaratory judgment action.

         C. GUARDIAN FLIGHT SUBSCRIPTION MEMBERSHIP PROGRAM

         In most states in which it operates, Guardian Flight offers a subscription membership program. In exchange for a membership fee of less than $100 per year, Guardian Flight considers any air ambulance charges beyond the amount paid by a member's insurance or other third parties to be prepaid by the member. Guardian Flight offers this membership program as part of an alliance of air ambulance providers affiliated under the name “AirMedCare Network.” The same parent company, AMGH, owns each of the AirMedCare Network companies. Persons who purchase an AirMedCare Network subscription are automatically enrolled in the membership program for each of the air ambulance companies in the AirMedCare Network.

         The program allows members to partially prepay Guardian Flight for the services it provides. The membership program does not guarantee service. Members cannot contact Guardian Flight or any other AirMedCare Network provider to provide transport when services are needed, and Guardian Flight is not required to indemnify or pay any specified amount to members or to third-party providers if the member is ultimately transported by an air ambulance service that is not part of the AirMedCare Network. If the patient is a member, the portion of the billing which is the responsibility of the patient is considered prepaid by the membership fee.

         Until the passage of SB 2231 in 2017, Guardian Flight's predecessor (Valley Med Flight) offered this membership program in North Dakota and had hundreds of members. SB 2231 prohibits subscription agreements. Guardian Flight would like to offer a subscription membership program in North Dakota but is prohibited from doing so by SB 2231.

         D. SB 2231

         In 2015, in an attempt to protect patients from enormous bills for air ambulance services, the North Dakota Legislature passed HB 1255 which created air ambulance call lists, required air ambulance providers to provide fee schedules upon request, and created a fee schedule for workers' compensation cases. Dwelle, 171 F.Supp.3d at 934. The Court determined that HB 1255 was preempted by the ADA and the McCarran-Ferguson Act did not provide reverse preemption protection because the law did not regulate the business of insurance. Id. at 942-45. The State did not appeal.

         In 2017, the North Dakota Legislature again tried to remedy the situation by passing SB 2231. SB 2231 is codified at N.D.C.C. §§ 26.1-47-08 and 26.1-47-09. Section 26.1-47-09(3) provides a payment by an insurer to a provider for air ambulance services to be a full and final payment with no option for the provider to seek the balance form the patient. Section 26.1-47-08 prohibits air ambulance subscription agreements. The two provisions provide as follows:

An air ambulance provider, or an agent of an air ambulance provider, may not sell, solicit, or negotiate a subscription agreement or contract relating to services or the billing of services provided by an air ambulance provider. An air ambulance provider, or agent of an air ambulance provider, which violates this section is subject to a civil fine in an amount not to exceed ten thousand dollars for each violation. The fine may be collected and recovered in an action brought in the name of the state.

N.D.C.C. § 26.1-47-08.

         1. A health benefit plan may not be issued in this state unless the plan provides the reimbursement rate for out-of-network air ambulance provider services is equal to the average of the insurer's in-network rates for air ambulance providers in the state.

         2. An insurer may not use the average of an insurer's in-network rates for air ambulance providers in the state in order to decrease current or future contractual rates between an insurer and an air ambulance provider.

         3. For purposes of settling a claim made by the insured for air ambulance services, a payment made by an insurer under the plan in compliance with this section is deemed to be the same as an in-network payment and is considered a full and final payment by the insured for out-of-network air ambulance services billed to the insured.

         4. This section does not apply to a policy or certificate of insurance, whether written on a group or individual basis, which provides coverage limited to:

a. A specified disease, a specified accident, or ...

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