A wave of ERISA class-action lawsuits is challenging tobacco surcharge programs in employer-sponsored health plans across the U.S. These cases center on potential fiduciary breaches, with plaintiffs arguing that surcharges added to tobacco users’ premiums are not compliant with federal laws such as the Employee Retirement Income Security Act (ERISA), the Affordable Care Act (ACA), and the Health Insurance Portability and Accountability Act (HIPAA). Designed to encourage wellness, tobacco surcharges are increasingly viewed as potentially punitive rather than supportive, prompting employers to reevaluate these programs’ structures.
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Rising ERISA Class-Action Lawsuits Over Tobacco Surcharges in Health Plans: What Employers Need to Know + 6 Steps to Stay Compliant
Fisher Phillips | Nov 2024
Articles
In the new wave of tobacco-free wellness program litigation, plaintiffs are claiming that the wellness program at issue discriminates against them on the health status-related factor of tobacco use because 1) it does not provide a reasonable alternative standard to being tobacco-free because it requires a participant to quit smoking, 2) the reasonable alternative standard to the surcharge was not disclosed in all plan materials discussing the wellness program, and/or 3) it does not offer the participant an opportunity to obtain the "full reward." The first and third theories of liability arise exclusively from the Regulation.
Understanding the Recent Wave of Litigation Targeting Tobacco-Free Wellness Programs
Holland & Knight | Dec 2024
The Macy’s case is challenging the viability of the Agencies’ regulations governing wellness programs following the U.S. Supreme Court’s June 2024 decision in Loper Bright Enterprises v. Raimondo, which abandoned Chevron[3] deference. Chevron deference had required federal courts to defer to “permissible” agency interpretations of the statutes those agencies administer – even when a reviewing court read the statute differently. In Loper Bright,[4] the U.S. Supreme Court held that courts must exercise their independent judgment in determining whether an agency has acted within its statutory authority, and courts may not defer to an agency interpretation simply because a statute is ambiguous. Recently, the judge in the Macy’s case gave the parties another opportunity to fully brief whether the Agencies’ regulations remain controlling law in the wake of Loper Bright. Macy’s has argued that the regulations are no longer valid. Unsurprisingly, the Secretary of Labor disagrees. If the district court agrees with Macy’s, it could have a domino effect on other pending cases.
What Employers Should Know About Tobacco Surcharge Litigation
UBGreensfelder | Nov 2024
The Secretary of Labor’s litigation against Macy’s, coupled with the consent order in Flying Food Group, may further embolden plaintiffs to bring more lawsuits against employers who apply tobacco-use surcharges in their wellness plans.
In light of the recent proliferation of these suits, employers might want to consider reviewing their plan documents to assess whether they should or do offer a reasonable alternative standard, such as a smoking cessation program. Employers might also consider evaluating how and with what frequency their plans are notifying members about the availability of reasonable alternative standards.
Updates on Tobacco Surcharge Class Action Litigation
Gibson Dunn | Oct 2024
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Tobacco surcharges done right reduce litigation risk
Mercer | Oct 2024
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