There has been a rise in lawsuits alleging discrimination against tobacco users in wellness programs. This law bulletin seeks to summarize and analyze the major arguments of those lawsuits in order to provide information to plan sponsors seeking to re-examine their wellness programs to avoid becoming a defendant in a similar lawsuit.

The three main arguments these lawsuits allege are that:

1. Plan sponsors must reimburse the participant the full amount of any tobacco surcharges paid upon completion of the wellness program conditions.
2. Plan sponsors are not permitted to require a participant to abstain from tobacco use as a condition of receiving the wellness program reward.
3. Plan sponsors must notify participants that they will receive the wellness program reward for the entire plan year upon completion of the conditions of the wellness program.

Reimbursement of All Tobacco Surcharges for the Entire Plan Year Upon Completion of the Conditions of the Wellness Program

In many of the lawsuits, plaintiffs allege that they have been discriminated against as they did not receive the “full reward” upon satisfying the conditions of the wellness program, including satisfying the wellness program’s reasonable alternative standard condition. In many of the benefit plan guides cited in such suits, participants only receive the reward on a prospective basis, meaning they would not receive reimbursement of surcharges paid earlier in the plan year for which the conditions of the wellness program reward are satisfied and thus the reward earned.

This argument most likely has merit as the regulations require a participant, upon satisfaction of the conditions of the wellness program, to receive the “full reward…for that plan year.” This is further enunciated in the preamble to the regulations, which provides an example highlighting this rule. In the example, a participant satisfies the conditions of the wellness program on April 1 and thus must receive the reward for January, February, and March — assuming that the participant’s employer is on a calendar year plan. Therefore, employers must provide the full reward to any participant who satisfies the conditions of the wellness program for that plan year.

Note to Employers: Ensure the tobacco cessation plan provides the full reward to participants who complete the conditions of the wellness program.

Complete Cessation From Tobacco Use as a Condition To Receive the Reward

The second main argument alleged by plaintiffs is that a wellness program may not require tobacco abstention as a condition for receiving the reward. This, too, will most likely be found to have merit. Plan sponsors are not permitted to require a participant to completely stop tobacco use in order to receive the reward, as doing so would cause the wellness program to “not provide a reasonable alternative standard” under the regulations.

Note to Employers: Ensure that complete tobacco cessation is not a requirement for receiving the reward under the wellness program. A reasonable alternative standard must always be provided.

Requirement to Notify Participants of the Removal of the Smoker Surcharge for the Entire Plan Year

The third main argument alleged by the plaintiffs is that the notice provided to participants was improper because it did not inform participants that they would be eligible to receive the “full reward” upon satisfaction of the conditions of the smoking cessation wellness program, including satisfaction of a reasonable alternative standard.

The regulations require that the notice “describe the terms of the plan.” This phrase is not directly defined in the regulations or related guidance, though its definition may be inferred based on the examples provided. In the preamble to the regulations, it states that disclosure of premium differential based on tobacco use would be considered as describing its terms, though simply stating that cost sharing may vary based on participation in a smoking cessation wellness program would not. Additionally, the regulations provide the following sample notice language:

“Your health plan is committed to helping you achieve your best health. Rewards for participating in a wellness program are available to all employees. If you think you might be unable to meet a standard for a reward under this wellness program, you might qualify for an opportunity to earn the same reward by different means. Contact Alex Mate at amate@taftlaw.com, and we will work with you (and, if you wish, with your doctor) to find a wellness program with the same reward that is right for you in light of your health status.”

Note to Employers: Ensure that participant notices comply with the regulations and requirements by setting forth all of the terms and conditions required to be satisfied to receive a reward under the wellness program. The participant notices must always include a statement about the availability of a reasonable alternative standard.

In light of the rise of lawsuits against plan sponsors’ wellness programs that contain smoking cessation rewards, employers may wish to review their current wellness programs and their operations to ensure compliance with the wellness program regulations. Please reach out to any member of Taft’s Employee Benefit and Executive Compensation group with questions.