If you are an employer that charges a higher premium for tobacco users on your health plan than for non-tobacco users, listen up. Plaintiffs’ lawyers are watching your tobacco cessation program closely for failure to comply with the Affordable Care Act (ACA) wellness incentive rules. In September 2024, several large companies were sued by potential class action plaintiffs for failing to comply to the letter with the ACA rules. These companies include Target, Walmart, Tractor Supply Company, 7-Eleven, the Carle Foundation, Advocate Aurora Health, Inc., and Gardaworld Cash Services, Inc.
A theme in all of these lawsuits is that employers did not retroactively reimburse tobacco users’ higher premiums once the tobacco user completed the tobacco cessation program. Under the ACA wellness incentive rules, the full reward must be available to employees who complete a “reasonable alternative standard,” which in the case of a tobacco surcharge, usually is completion of a tobacco cessation program. Tobacco users who completed the tobacco cessation programs qualified to get their health insurance premiums reduced going forward, but not going back to the beginning of the plan year. The plaintiffs in these seven lawsuits allege that employer health plans that do not reimburse the difference between the tobacco user premium and the non-tobacco user premium once an individual completes the reasonable alternative standard breaches the plan’s ERISA fiduciary duty to keep health plan monies for the benefit of the participants. The plaintiffs in all seven lawsuits also allege that the employers failed to sufficiently notify employees in all plan materials about how to avoid the tobacco surcharge and receive the full reward (i.e., pay the lower premium).
Of the seven lawsuits, the case against Gardaworld stands out as being the most unique in that it claims that although Gardaworld may have offered a tobacco cessation program to avoid the surcharge, which amounted to an additional $100 per month, it did not offer another reasonable alternative standard for employees who could not complete the tobacco cessation program. In other words, the Gardaworld case alleges that employers should be offering more than one type of reasonable alternative standard to employees to avoid tobacco surcharges. See Paragraph 25 of the Gardaworld case Complaint.
The Gardaworld case also has another unique twist from the other six lawsuits: the plaintiffs also allege that Gardaworld imposed a $90/month surcharge on employees who did not submit proof of full vaccination for COVID-19. The plaintiffs argue that requiring proof of vaccination is a health contingent wellness program under the ERISA wellness incentive rules that must meet certain criteria, including the offer of a reasonable alternative standard to vaccination. Plaintiffs claim that the only way to avoid the vaccination surcharges imposed by Gardaworld was to get vaccinated. Plaintiffs allege the failure to provide a reasonable alternative standard for a vaccination requirement, and notice of the availability of that alternative, violates the ERISA wellness incentive rules.
What Should Employers Do?
Employers who charge tobacco users a higher premium should hire competent legal counsel immediately to evaluate whether they are following the ACA wellness incentive rules. The best way to avoid litigation is to be proactive in your compliance efforts. Please contact us at Wellness Law so we can help you understand your compliance obligations for worksite wellness programs.
The lawsuits are Baker v. 7-Eleven, Inc., Case No. 24-cv-1360 (W.D. Penn. 9/26/24); Keesler v. Tractor Supply Company, Case No. 24-cv-1612 (M.D. Penn. September 23, 2024); Blair Artis and Jonathan Fisher v. Gardaworld Cash Services, Inc, Case No. 24-cv-837 (W.D. N.C. September 16, 2024); Joseph Williams v. Target Corporation, Case No. 24-cv-3748 (D. Minn. September 26, 2024); Annette M. Cunningham and Samantha M. Dennis v. Walmart, Inc., Case No. 24-cv-1177 (E.D. Wis. September 16, 2024); Deborah Waggoner v. The Carle Foundation, Case No. 24-cv-2217 (C.D. Ill. September 20, 2024); Kelly Rogers and Kathryn Disinger O’Flaherty v. Advocate Aurora Health, Inc., Case No. 24-cv-8864 (N.D. Ill. September 25, 2024).