April 3, 2026

Employer Scores Another Tobacco Premium Surcharge Win

Daniel Cohen, Rich Smith, Jr., Kara Petteway Wheatley Groom Law Group, Chartered + Follow Contact LinkedIn Facebook X Send Embed

On March 20, a federal court in Ohio dismissed a tobacco premium surcharge lawsuit in its entirety for failure to state a claim.  This marks the third **** time that a federal court has held that ERISA does not require employers to retroactively reimburse participants for premium surcharges they paid prior to completing a tobacco cessation course.  We have described prior decisions dismissing tobacco premium surcharge cases here and here.

As we have previously explained, more than 50 substantially similar lawsuits have been filed against employers in federal district courts across the country challenging their imposition of a premium surcharge on tobacco users.  New lawsuits continued to be filed on a regular basis.

The key issue in these cases is whether employers can prospectively **** remove the premium surcharge when the participant completes a wellness program’s “reasonable alternative standard,” which typically is a tobacco cessation course.  Plaintiffs have argued that employers are required to provide retroactive reimbursement of premium surcharges—that is, reimbursement of the total amount of premium surcharges they have paid during a plan year—upon completion of the tobacco cessation course. The plaintiffs’ claims are based on their interpretation of the term “full reward” as used in statutory and regulatory text governing wellness programs.

In Greene v. Progressive Corp., the Northern District of Ohio rejected the plaintiffs’ challenge to the employer’s prospective removal of premium surcharges imposed on participants for the use of tobacco and the failure to obtain certain vaccinations.  The court held that:

• No retroactive reimbursement of premium surcharges is required.  The court joined the Southern District of New York and the District of Rhode Island to hold that an employer is not required to provide retroactive reimbursement of premium surcharges when a participant completes a tobacco cessation course (or obtains the required vaccinations) during the plan year.  The court held the employer provided the “full reward” to participants who completed the tobacco cessation course (or became vaccinated) because the premium surcharge was removed on a going-forward basis.
• The employer did not act as an ERISA fiduciary when implementing the wellness program. The court held that the employer acted as a settlor when designing the plan’s terms, including the terms of the wellness program, and that the implementation of those terms did not involve a discretionary act by the employer.  As a result, the court held that ERISA’s fiduciary standards did not apply to the challenged conduct and it dismissed the plaintiffs’ breach of fiduciary duty and prohibited transaction claims.
• The employer’s notice regarding the wellness program complied with ERISA.  The summary plan description’s notice of the wellness program was substantially similar to the Department of Labor’s sample notice.  Among other things, the notice expressly stated that the employer would work with a participant and his or her doctor to find an alternative if the participant was unable to meet the wellness program’s requirements.  As a result, the court found that the notice complied with the applicable statutory and regulatory requirements. This recent decision adds to a growing body of authority holding that employers (1) do not act as ERISA fiduciaries when implementing non-discretionary plan terms and (2) do not violate ERISA when they prospectively remove premium surcharges when a participant completes a wellness program’s requirements.  We are continuing to monitor developments in this evolving area of ERISA health plan litigation.

"If Congress intended the statute to provide the reward retroactive for the entire plan year, then it could have easily stated as much."
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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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