Employers are facing a surge in class action lawsuits challenging health plan premium surcharges imposed on smokers and other tobacco users, commonly referred to as “smoker surcharges.” Earlier this year Bass Pro Shops agreed to pay $4.95 million to settle one such lawsuit.
The Health Insurance Portability Protection Act (HIPAA) generally prohibits employer group health plans from discriminating against plan participants on the basis of health status, including tobacco use. However, HIPAA contains a limited exception allowing employers to do so in connection with wellness program incentives, provided the wellness programs are created and maintained in compliance with the detailed legal requirements contained in HIPAA’s wellness program rules.
These class action lawsuits challenge employer compliance with these requirements, including (i) whether the program provides a “reasonable alternative standard” to being tobacco-free (e.g., participation in a tobacco cessation program), (ii) whether the full reward of completing the “reasonable alternative standard” is being made available to participants and (iii) whether the “reasonable alternative standard” to the surcharge is adequately and appropriately disclosed to plan participants.
In light of this recent spate of litigation, employers that impose a premium surcharge for tobacco users or offer a nonsmoker premium discount should review with legal counsel their health plan enrollment materials, including those used as part of the annual open enrollment process, and wellness program documentation and processes to ensure the tobacco surcharge or nonsmoker discount is designed and being administered in accordance with HIPAA’s nondiscrimination rules.