Have you been burned because you smoked?
If you use tobacco or vape and your employer has added an extra surcharge to your health insurance premiums, you are not alone. Under the Affordable Care Actemployers may charge tobacco users up to 50% more for health coverage. On average this amounts to approx $55 per month, or about $660 per year.
But here’s what most workers don’t know: Federal law requires that your employer give you a reasonable way out of that benefit, such as enrolling in a smoking cessation program. And according to a growing wave of ERISA class action lawsuitsMany large companies have never done that.
What the law actually requires
Three federal laws regulate tobacco surcharges on employer health plans: ERISA, the ACA and HIPAA. Together they set five requirements that your employer must meet:
- Offer you the opportunity to avoid the surcharge at least once a year
- Keep the surcharge below 50% of the total cost of coverage
- Design the program to promote health, not punish you
- Provide a reasonable alternative, such as a quit program, for employees who cannot meet the standard
- Communicate the alternative clearly in all plan materials
If your employer charged you the surcharge without telling you about an alternative to quitting, or without offering one, that surcharge may have been unlawful.
Who is being charged
Several large employers are facing class action lawsuits over their tobacco surcharge programs. According to HR morningRecent cases include:
- Campbell Soup Company — Employees claim surcharge violates ERISA because waivers only applied going forward, not retroactively as required
- Tractor Supply Co. — Employee claimed that no reasonable alternative was offered
- 7-Eleven — Proposed class action alleging surcharge imposed without reasonable alternative
- PepsiCo — A class action alleging benefits targeted employees based on their health status in violation of ERISA
The Ministry of Labor has also taken enforcement action. In the Flying Food Group casea federal court ordered the Chicago food service provider to reimburse $16,660 to employees who were charged a tobacco surcharge without being told of their right to a reasonable alternative.
6 yearsLookback period
7 statesCompletely ban surcharges
Some states ban it completely
Even though federal law allows tobacco surcharges, seven states and DC ban them completely: California, Massachusetts, New Jersey, New York, Rhode Island, Vermont and Washington, D.C. Virginia also banned them in the individual and small group markets in 2023.
If you live in one of these states and you’re still being charged a fee, this is an even more obvious potential violation.
Why this is important if you have debt
Here’s my stance on this. If you’ve been paying an extra $50 or $60 a month on your health insurance because you smoke, that’s money that could have been used to pay off debt, build an emergency fund or just keep the lights on.
Debt is what’s left when the math doesn’t add up. An illegal surcharge that you didn’t know you could avoid? That’s someone else doing your math for you.–Steve Rhode
Over six years, a $55 per month benefit amounts to almost $4,000. If your employer broke the law by not offering you a way out, you may be entitled to some or all of it back.
Are you eligible?
According to the research by Siri & Glimstad LLPyou may qualify if:
- You have worked for a company for the past six years
- You paid a higher health insurance premium due to the use of tobacco or vape
- You were enrolled in employer-sponsored health insurance
- You have used tobacco or nicotine products, including e-cigarettes
What to do
- Check your pay slips or benefit statements for any line item labeled ‘tobacco surcharge’, ‘wellness surcharge’ or ‘nicotine premium’
- Review your plan documents – have they clearly explained a quit program or a reasonable alternative?
- If they didn’tyour employer may have violated federal law
- Consider participating in the study bee Top class actions
Key Takeaways
- Federal law allows tobacco surcharges but requires employers to offer a reasonable alternative, such as a cessation program
- Several major companies – Campbell Soup, PepsiCo, 7-Eleven, Tractor Supply – are facing class action lawsuits for failing to meet this requirement
- The average benefit is approximately $660/year, and the lookback period covers up to six years
- Seven states plus DC ban tobacco surcharges entirely
- If you have been charged without being offered an alternative, you may be entitled to a refund
Frequently asked questions
Can my employer legally charge me more for tobacco use?
Yes, but only if they follow federal rules. Under the ACA, employers can limit tobacco users to 50% more premiumbut they must provide a reasonable alternative – such as a smoking cessation program – and communicate this clearly in plan materials.
How much is the average tobacco surcharge?
The average tobacco surcharge on employer-sponsored health insurance is approx $55 per month, or about $660 per year. Some plans charge more, others less, and the surcharge increases as premiums rise.
What should I do if I have completed a quit program but am still being charged?
That could be a violation. Federal regulations required that completing a cessation program will result in the benefit being waived retroactively to the start of the plan year – regardless of whether you have actually stopped smoking.
Which States Ban Tobacco Surcharges?
According to published researchCalifornia, Massachusetts, New Jersey, New York, Rhode Island, Vermont and Washington DC completely ban tobacco surcharges on health insurance.
How can I join the class action investigation?
The law firm Siri & Glimstad LLP is conducting research these claims. If you have paid a tobacco surcharge in the past six years and were not offered a reasonable alternative, you can submit your details free of charge via Top Class Actions.
(Source: Top Class Actions)
#Tobacco #Surcharge #Lawsuit #Overcharged