ERISA Tobacco Surcharge Litigation

Understanding the trend

What is this trend?

A nationwide wave of ERISA class actions targeting employer-sponsored group health plans that impose a monthly 'tobacco surcharge' (typically $20–$150/month) on self-reported smokers and nicotine users without offering a HIPAA-compliant reasonable alternative standard or providing proper notice.

What caused it

Three structural drivers: (1) HIPAA's wellness-program safe harbor requires plans charging a tobacco surcharge to offer a reasonable alternative standard (RAS) — and to clearly disclose it in plan documents and on every benefit form; many plans fail one or both prongs. (2) The successful Buescher v. North American Lighting case (April 2024) and subsequent settlement template spawned a copy-cat playbook now exported to dozens of large employers. (3) Plaintiff-firm investigators are systematically Facebook-targeting current and former employees of brand-name employers, and forecasting tools surface the next defendants by reading their open-enrollment kits and ACA Form 5500 filings.

Practices driving the lawsuits

• Charging a tobacco-use surcharge without offering any reasonable alternative standard (RAS) — or burying the RAS where most employees never see it
• Requiring smokers to enroll in a cessation program *and* successfully quit to avoid the surcharge (outcome-based vs. activity-based)
• Failing to provide the HIPAA-required annual notice describing the RAS in every plan communication that mentions the surcharge
• Conditioning the standard premium (rather than offering it as the default) on non-smoker certification, then refusing to refund or pro-rate when an employee enrolls in a cessation program mid-year
• Self-reported tobacco questions on enrollment with no mechanism to update status, locking in the surcharge for 12 months even after quitting
• Surcharge structured as a 'tobacco fee' or 'tobacco-related health fee' rather than a wellness-program surcharge — bypassing HIPAA wellness regulations entirely