FARGO -- A federal judge has ruled that the state of North Dakota overstepped its authority in passing a law to regulate air ambulance services in an attempt to prevent what legislators called price "gouging" against consumers.
Judge Daniel Hovland of U.S. District Court in Bismarck ruled in favor of Valley Med Flight, which argued that the state was trying to usurp federal law in creating a primary air ambulance carrier list.
In order to get on the list, air ambulance services effectively had to agree to become participating providers with Blue Cross Blue Shield of North Dakota, a designation that means they agree to accept the insurer's reimbursement as full payment for a flight.
The Legislature passed the law in 2015 in response to complaints from consumers who were stuck with high air ambulance bills -- 20 bills submitted last year to state insurance regulators averaged more than $40,000 and left patients with an average out-of-pocket expense of $24,514.
The average paid by insurance was $14,925, or a little more than a third of the total bill, according to figures compiled by the North Dakota Department of Insurance.
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Valley Med Flight argued that Blue Cross Blue Shield's payments failed to meet its costs, but grudgingly signed a one-year agreement to become a participating provider to remain in business -- then filed its lawsuit in federal court.
"I'm more disappointed that we had to do this than I am happy with the decision," Jesse Riddle, general counsel for Grand Forks-based Valley Med Flight, said Tuesday, March 22.
"We're reviewing the decision," said Liz Brocker, a spokeswoman for Attorney General Wayne Stenehjem. She declined further comment.
In his decision, Hovland called the contested law "well-intentioned and enacted in good faith," but said it is clear Congress "has assumed the field in the arena of air carrier regulation and noble intent does not save the law from preemption."
The law created a primary call list of air ambulance services including only operators that qualified as "participating providers" with health insurance carriers that together made up 75 percent of the health insurance market.
Blue Cross Blue Shield of North Dakota alone has more than half of the private health insurance market in the state.
Valley Med Flight argued that the law created an "artificial hierarchy" of air ambulance services, and illegally regulated air ambulance services' ability to charge market rates.
By passing the law, North Dakota in essence handed over its authority to Blue Cross Blue Shield of North Dakota to set air carrier rates for ambulance service, Riddle said.
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"I don't know what a fox guarding a henhouse is, but if this isn't it, I don't know what is," he said.
North Dakota passed the law despite a long line of legal opinions providing clear guidance to help states avoid pre-empting federal authority issued by the U.S. Department of Transportation, Riddle said.
Now consumers who are served by air ambulance operators that do not become participating providers will once again face large bills for costs not covered by insurance, he said. Some have sued Blue Cross Blue Shield, Riddle said.
"I think the market will step in and correct this," he said.
Blue Cross Blue Shield of North Dakota was not a party in the lawsuit, but its role as the dominant insurance company factored prominently in the dispute.
"Blue Cross Blue Shield of North Dakota works diligently with providers throughout the state to provide affordable health care services to North Dakotans, and will continue to do so, striving to balance our member's needs in access to services and cost of care," said Andrea Dineen, a spokeswoman for the North Dakota Blues.
