Walmart's tobacco surcharge unfairly raised health insurance costs, affected employees claim in a new class-action lawsuit.
The workers said the surcharge raises premiums for certain employees, violating anti-discrimination provisions in the Employee Retirement Income Security Act (ERISA) based on tobacco use.
Walmart charged employees that used tobacco $30 to $195 per biweekly pay period. Households with more tobacco users and health plan type were factors that determined how much extra individuals paid.
These funds were withheld from paychecks and deposited in the health plan’s trust account. On average, this totaled $1,150 annually per plaintiff in the lawsuit.
Corporate wellness programs are allowed to incentivize healthier behavior, but extra fees cannot be charged unless a “reasonable alternative standard” is clearly relayed to all participants through all health plan materials, the lawsuit explains. One example would be thoroughly explaining that participation in a smoking cessation program allows employees to avoid extra fees.
These alternatives must attempt to improve health outcomes or prevent disease, according to Department of Labor regulations.
An associate handbook provided to employees said that employees that quit tobacco can only stop paying higher rates once the next open enrollment period begins.
“This means participants who become tobacco-free partway through the plan year or who complete a smoking cessation program can avoid future surcharges but are not retroactively reimbursed for any surcharges already paid in that plan year,” the lawsuit explained. “This practice violates ERISA’s requirements that participants receive the 'full reward' after satisfying the alternative standard.”
And, by directing extra funds to the health plan’s trust, Walmart is able to contribute less to the trust to ensure its employees’ health insurance is properly funded.
Walmart has more than 2 million employees worldwide and operates in all 50 U.S. states. Humana recently announced it would be opening 23 primary care clinics within Walmart locations in four states.