Tobacco Fees

Millions of American workers pay hundreds, or even thousands, of dollars per year in tobacco surcharges, smoking surcharges, and nicotine surcharges added to their employer-sponsored health insurance premiums. It appears the overwhelming majority of these surcharge programs are unlawful. If you’ve paid a tobacco surcharge to your employer at any point in the past six years, you may have a legal claim to recover every dollar you were charged.

The attorneys at Siri & Glimstad have built the most active tobacco surcharge litigation practice in the United States, representing employees in federal court against Fortune 500 employers nationwide. We handle every step of these cases, from initial pay stub review through certification, summary judgment, mediation, and trial.

A tobacco surcharge (also called a smoking or nicotine surcharge) is an additional health insurance premium that an employer charges employees who use tobacco products. The surcharge is typically deducted from each paycheck and ranges from $20 per month at smaller employers to more than $100 per month at large Fortune 500 plans, with total annual costs that can exceed $2,400 per employee.

Employers usually include tobacco surcharges as part of a “wellness program” designed to encourage healthier behavior. But labeling a charge as a “wellness incentive” does not make it lawful. The Employee Retirement Income Security Act (ERISA) strictly regulates when an employer may charge any premium differential based on a health factor, and tobacco use is a health factor under federal law.

ERISA prohibits group health plans from charging similarly situated individuals different premiums based on a health factor. Congress carved out a narrow exception for health-contingent wellness programs but to qualify for that exception, a wellness program that imposes a tobacco surcharge must satisfy specific requirements. Importantly, the employer carries the burden of proving that its program meets every one of these requirements.

A company can charge a tobacco surcharge only if it follows certain rules. Employees must get a fair chance each year to avoid the surcharge. The surcharge cannot be too large. The program must be designed to help employees stop using tobacco, not just punish them. If quitting is too hard or not medically safe for an employee, the company must offer another way to avoid the surcharge, like taking a class or completing a tobacco-cessation program. The company must also clearly tell employees about this option in all materials that discuss the surcharge.

One important rule is that employees who complete the alternative program must get the full reward. This means that if an employee finishes the program in May, the company must refund or credit the tobacco surcharges taken from January through April. The company cannot just stop charging the surcharge going forward and keep the money it already took.
Most employer wellness programs fail this requirement. They stop the surcharge prospectively after the employee completes the cessation program, but they pocket the surcharges already collected. That practice is unlawful under federal law.

In our experience representing employees nationwide against Fortune 500 employers, the most common violations are:

• No reasonable alternative standard. The plan offers no cessation course or other way to avoid the surcharge.
• Reasonable alternative offered, but not the full reward. The plan offers a cessation program but refuses to refund the surcharges already paid in earlier months of the plan year.
• Inadequate notice and disclosure. Plan materials fail to advise employees that a reasonable alternative is available and that the full reward can be obtained by completing it.
• Practical inaccessibility. The reasonable alternative is offered only during a limited window, requires impractical documentation, or is not meaningfully publicized to employees.
• Forced certifications without a real alternative. Employees are required to “certify” tobacco-free status without any meaningful reasonable alternative or notice that one exists.

Each of these violations gives rise to claims under ERISA, on behalf of the participant and (in most cases) on behalf of every other plan participant who paid the surcharge.

ERISA provides multiple, overlapping avenues for relief, including improperly withheld premium amounts, including repayment of surcharges paid during the limitations period. Other equitable relief is also available.

In class actions, this recovery extends to every employee who paid the surcharge, which can mean hundreds or thousands of participants per plan.

You may have a tobacco surcharge claim if:

• You currently pay, or have paid in the past six years, any amount labeled as a tobacco surcharge, smoking surcharge, nicotine surcharge, premium differential, or wellness surcharge.
• Your employer’s enrollment materials did not clearly explain how to avoid the surcharge through a cessation program or educational course.
• You completed a cessation program but did not receive a refund of the surcharges that were already deducted from your paycheck earlier in the plan year.
• Your employer required you to certify your tobacco status without offering a meaningful alternative path to the full reward.
• You are a former employee who paid the surcharge during your employment.

Recovery does not require that you actually quit tobacco use. The legal violation runs against the design and operation of the plan itself, not against the participant’s behavior.

Tobacco surcharges are most prevalent at large employers with self-insured health plans. Major retailers, manufacturers, grocery chains, healthcare systems, food service companies, transportation and logistics companies, and Fortune 500 employers across virtually every industry have adopted tobacco surcharge programs.

If you work for, or recently worked for, a large employer that offers health insurance, you should review your pay stubs and enrollment materials for any tobacco-related premium differential.

If you’ve paid a tobacco surcharge, smoking surcharge, or nicotine surcharge to your employer, contact Siri & Glimstad today for a free, confidential evaluation of your claim. We routinely review pay stubs, open enrollment materials, and other plan documents to identify violations and pursue full recovery.

There is no cost for an initial consultation. We get paid only if we recover benefits on your behalf.