The Supreme Court refused to hear an appeal from a Texas Supreme Court decision that allowed the State of Texas to regulate air ambulance charges in workers’ compensation cases.

The Supreme Court’s refusal to hear the case leaves in place a patchwork of state and federal court opinions about whether the Federal Aviation Act pre-empts state workers compensation laws that limit medical expenses for air ambulances.

Air ambulances and federal pre-emption is a dry and often esoteric, maybe even boring topic. But as Jon Gelman pointed out in his post on the decision, the right to regulate medical expense in workers’ compensation case helps states manage the cost of workers’ compensation. As I’ve pointed out at near ad nauseam, workers’ compensation laws are state-based laws. So, that’s why the air ambulance pre-emption issue matters to workers compensation.

So, what do I think of the Supreme Court’s decision to punt on the issue? Bluntly, I’m kind of relieved. I base my feelings on my big picture views of the Supreme Court and my very narrow interests in Nebraska workers compensation laws.

Do you really want Amy Coney Barrett and friends making decisions about workers comp.?

Well, do you?

From an academic perspective, the Texas Supreme Court decision on workers compensation and air ambulance billing is interesting. It’s really a discussion about the nature of workers’ compensation. Is it primarily an insurance program or is it primarily a law that regulates the relationship between employee and employer? My fear was that the current Supreme Court could pick up on any of the threads within the Texas case and make the law worse for injured workers.

Workers compensation as a law regulating the relationship between labor and management

So, if workers compensation is law that regulates the workplace, the dissent in the Texas decision held that air ambulances charges would be pre-empted. That would be a bad outcome for workers on air ambulance charges. It could also open the door for pre-emption on other issues to the detriment of employees.

Workers compensation as a law regulating insurance

The concurring opinion in the Texas held that their state’s regulation of air ambulance charges in workers’ compensation cases was not pre-empted because workers compensation is a law regulating insurance. Under the federal McCarran-Ferguson Act those laws are state laws and not subject to pre-emption. At least two trial Judges in the Nebraska Workers Compensation Court take this approach. Since the Supreme Court hasn’t weighed in on the issue, I can take this approach on air ambulance charges for the benefit of my clients in Nebraska.

But the Texas court also held that air ambulance charges weren’t pre-empted based on an originalist view of federalism. The Texas opinion starts out about states retaining some sovereignty when entering into the Union. In my view this language seems real overwrought. If I was a law student reading that opinion today, I might put a note like “Sir, this is a Wendy’s” by that passage.

Some plaintiff’s lawyers will go down the state’s rights rabbit hole. But I don’t like the state’s rights approach because it gives states the rights to implement lousy workers compensation laws. Texas is a model for how the state’s rights approach fails workers.

McCarrran-Ferguson: State’s rights lite?

McCarran-Ferguson is a more pragmatic argument against workers compensation pre-emption. But McCarran Ferguson is based on some dubious legal fiction. McCarran-Ferguson was passed to more or less repeal the Southeastern Underwriters case. That case held that insurance was interstate commerce.

Now the notion that insurance is interstate commerce would seem obvious to most people, but insurance wasn’t held to be commerce during much of the Lochner era. The Roberts court also seemed to question whether insurance was interstate commerce when they upheld the Affordable Care Act in 2012.

My other problem with McCarran-Ferguson is that it limits how we think about workers’ compensation.  It locks judges and lawyers into adopting a legal fiction in order to give workers a fair outcome in workers compensation cases regarding air ambulance charges and other issues where federal laws could undercut recovery under state workers’ compensation laws.

McCarran-Ferguson also cements “states rights” thinking about workers compensation. Such thinking precludes the possibility of federal intervention for the benefit of employees that helped workers in the 1970s and 1980s. Originalist thinking and the Lochner era thinking behind McCarran Ferguson by plaintiff’s attorneys also prevents thinking how to make much needed reforms to our social insurance system in general.