DOL wellness program guidance pushes back on wave of tobacco surcharge lawsuits

Over the past couple of years, numerous large employers and their health plan fiduciaries have faced lawsuits regarding their health plan’s tobacco surcharge. A tobacco surcharge wellness program typically charges a higher monthly premium to employees and covered dependents who smoke or otherwise use tobacco products to account for some of the higher medical costs associated with tobacco use. Tobacco users can typically avoid the surcharge by completing a smoking cessation program, regardless of whether they actually quit.

This wave of putative class action lawsuits began in 2024 even though employer tobacco surcharges have been around for years and the Health Insurance Portability and Accountability Act (HIPAA) regulations permitting the surcharges were last updated in 2013. Since then, numerous lawsuits challenging employer health plan tobacco surcharge programs have been filed. Courts have tended to side with employers, but rulings have been mixed.

What the lawsuits claim

The lawsuits typically allege that the employer and its health plan fiduciaries breached their fiduciary duties under the Employee Retirement Income Security Act (ERISA) by impermissibly discriminating against tobacco users by charging higher premiums because of some combination of the following: