Plaintiffs have filed more than 40 lawsuits against employer health plans that impose a tobacco surcharge.  We anticipate that plaintiffs may file additional, substantially similar lawsuits against employers, particularly given that at least one plaintiffs’ firm is actively seeking participants to serve as plaintiffs in such lawsuits.  The case law on the tobacco surcharge litigation is unsettled. One federal district court recently held that an employer’s wellness program was properly structured and complied with the HIPAA wellness rules but allowed the plaintiff’s complaint that the health plan failed to provide all the notices required under the HIPAA wellness rules to proceed.  Other federal district courts have denied motions to dismiss the plaintiffs’ claims that the wellness programs violate the HIPAA wellness rules. 

There are two proactive steps employers can take to avoid being targeted in a lawsuit – 

1. Review the Tobacco Surcharge Structure.  Plaintiffs often allege that the wellness program violates the HIPAA wellness rules by only offering the financial incentive – such as the premium reduction – prospectively rather than retroactively applying the reduction to the premiums paid for the entire plan year.  Employers should ensure that any surcharge that will be imposed complies with the requirements of the wellness program rules.   
2. Ensure Disclosure of the Notices Required by the HIPAA Wellness Rules.  Every court that has rendered a decision on an employer’s motion to dismiss has held that the plaintiffs plausibly alleged violations of the wellness program rules’ notice requirements.  Employers should review the plan’s materials and ensure they satisfy the HIPAA wellness rules’ notices requirements.  Under the HIPAA wellness rules, plans must disclose in all plan materials that describe the terms of the wellness program the availability of the reasonable alternative standard.  The rules also require that this disclosure include contact information and a statement that an individual’s personal physician may be accommodated.  The regulations provide sample language.

You can read about the wellness rule requirements here. 

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