Quick Answer: A wave of class action lawsuits alleges that major employers illegally charged tobacco-using employees hundreds of dollars per year in health insurance surcharges without offering the federally required alternative—like a smoking cessation program. If you’ve paid a tobacco surcharge in the past six years, you may be owed money back.
Did you get burned for being a smoker?
If you use tobacco or vape and your employer tacked an extra charge onto your health insurance premiums, you’re not alone. Under the Affordable Care Act, employers are allowed to charge tobacco users up to 50% more for health coverage. On average, that works out to about $55 per month—or roughly $660 a year.
But here’s what most employees don’t know: federal law requires your employer to give you a reasonable way out of that surcharge, like enrolling in a smoking cessation program. And according to a growing wave of ERISA class action lawsuits, many major companies never did that.
What the Law Actually Requires
Three federal laws govern tobacco surcharges on employer health plans: ERISA, the ACA, and HIPAA. Together, they set five requirements your employer must meet:
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- Offer you at least one chance per year to avoid the surcharge
- Keep the surcharge under 50% of total coverage cost
- Design the program to promote health—not punish you
- Provide a reasonable alternative, like a cessation program, for employees who can’t meet the standard
- Clearly communicate the alternative in all plan materials
Key Point: According to Department of Labor regulations, if you complete a cessation program, your employer must waive the surcharge—retroactive to the start of the plan year—even if you didn’t actually quit smoking. Completion is what counts, not the outcome.
If your employer charged you the surcharge without telling you about a cessation alternative, or without offering one at all, that surcharge may have been illegal.
Who’s Being Sued
Several major employers are facing class action lawsuits over their tobacco surcharge programs. According to HR Morning, recent cases include:
- Campbell Soup Company — Employees allege the surcharge violated ERISA because waivers only applied going forward, not retroactively as required
- Tractor Supply Co. — Employee alleged no reasonable alternative was offered
- 7-Eleven — Proposed class action alleging surcharge imposed without a reasonable alternative
- PepsiCo — Class action alleging surcharges targeted employees based on health status in violation of ERISA
The Department of Labor has also taken enforcement action. In the Flying Food Group case, a federal court ordered the Chicago food service provider to reimburse $16,660 to employees who were charged a tobacco surcharge without being told about their right to a reasonable alternative.
Some States Ban It Completely
Even though federal law allows tobacco surcharges, seven states and D.C. prohibit them entirely: California, Massachusetts, New Jersey, New York, Rhode Island, Vermont, and Washington, D.C. Virginia also banned them in the individual and small group market in 2023.
If you live in one of these states and were still charged a surcharge, that’s an even clearer potential violation.
Why This Matters If You’re in Debt
Here’s my angle on this. If you’ve been paying $50 or $60 a month extra on your health insurance because you smoke, that’s money that could have gone toward paying down debt, building an emergency fund, or just keeping the lights on.
Debt is what’s left over when the math is broken. An illegal surcharge you didn’t know you could avoid? That’s someone else breaking your math for you.— Steve Rhode
Over six years, a $55/month surcharge adds up to nearly $4,000. If your employer violated the law by not giving you a way out, you may be entitled to get some or all of that back.
Do You Qualify?
According to the investigation by Siri & Glimstad LLP, you may qualify if:
- You worked for a company within the past six years
- You paid higher health insurance premiums due to tobacco or vape use
- You were enrolled in employer-sponsored health insurance
- You used tobacco or nicotine products, including e-cigarettes
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What to Do
- Check your pay stubs or benefits statements for any line item labeled “tobacco surcharge,” “wellness surcharge,” or “nicotine premium”
- Look at your plan documents — did they clearly explain a cessation program or reasonable alternative?
- If they didn’t, your employer may have violated federal law
- Consider joining the investigation at Top Class Actions
Important: This is an investigation, not a settled case. There is no guaranteed payout. But if you paid a tobacco surcharge and were never told about an alternative, it costs nothing to submit your information and see if you qualify.
Key Takeaways
- Federal law allows tobacco surcharges but requires employers to offer a reasonable alternative like a cessation program
- Multiple major companies—Campbell Soup, PepsiCo, 7-Eleven, Tractor Supply—face class action lawsuits for not meeting this requirement
- The average surcharge is about $660/year, and the lookback period covers up to six years
- Seven states plus D.C. ban tobacco surcharges entirely
- If you were charged without being offered an alternative, you may be owed a refund
FAQ
Can my employer legally charge me more for using tobacco?
Yes, but only if they follow federal rules. Under the ACA, employers can charge tobacco users up to 50% more in premiums, but they must offer a reasonable alternative—like a smoking cessation program—and clearly communicate it in plan materials.
How much is the average tobacco surcharge?
The average tobacco surcharge on employer-sponsored health insurance is approximately $55 per month, or about $660 per year. Some plans charge more, some less, and the surcharge increases as premiums rise.
What if I completed a cessation program but was still charged?
That may be a violation. Federal regulations require that completing a cessation program results in the surcharge being waived retroactively to the start of the plan year—regardless of whether you actually quit smoking.
Which states ban tobacco surcharges?
According to published research, California, Massachusetts, New Jersey, New York, Rhode Island, Vermont, and Washington D.C. completely prohibit tobacco surcharges on health insurance.
How do I join the class action investigation?
The law firm Siri & Glimstad LLP is investigating these claims. If you paid a tobacco surcharge in the past six years and weren’t offered a reasonable alternative, you can submit your information through Top Class Actions at no cost.
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