Paying More for Employer Health Insurance Because of Tobacco or Nicotine Use?
Employer-sponsored health plans may charge employees more for health coverage because they or a covered family member use tobacco or nicotine products. Depending on how a wellness program is structured, disclosed, and administered, these surcharges may raise issues under the Employee Retirement Income Security Act of 1974 (ERISA) and related wellness-program requirements.
Recent Proposed Settlements Illustrate Tobacco-Surcharge Litigation
Two class action matters in which motions for preliminary approval of proposed settlements were filed on September 21, 2026 illustrate the types of ERISA claims being litigated over employer tobacco and nicotine surcharges.
LHC Group. Knight v. LHC Group, Inc., No. 6:25-cv-00263 (W.D. La.). The plaintiff alleges that LHC Group, Inc. violated ERISA by imposing a discriminatory tobacco surcharge on Plan participants without offering a reasonable alternative standard as required by ERISA and its implementing regulations. The Court denied LHC Group’s motions to dismiss. The parties thereafter reached an agreement in principle to resolve the case on a class-wide basis after exchanging information and engaging in arm’s-length negotiations. The September 21, 2026 filing seeks preliminary approval of a proposed common-fund class action settlement that, if approved, would establish a Gross Settlement Amount of $800,000.
Nordstrom. Takala v. Nordstrom, Inc., No. 2:25-cv-01396-JHC (W.D. Wash.). The plaintiffs allege that Nordstrom, Inc. violated ERISA by imposing a $20 biweekly tobacco surcharge on Plan participants without satisfying ERISA’s wellness-program requirements, including the required disclosures concerning a reasonable alternative standard, and breached fiduciary duties by administering surcharge revenue for its own benefit. Nordstrom denies all liability. The September 21, 2026 unopposed motion seeks preliminary approval of a class action settlement that would create a $450,000 common fund funded by Nordstrom. The proposed settlement remains subject to court approval.
What Employees Should Know About Tobacco and Nicotine Surcharges
These examples do not establish that every tobacco or nicotine surcharge violates ERISA. Whether a particular surcharge may warrant legal review depends on the plan documents and disclosures, whether ERISA’s wellness-program requirements were satisfied, including requirements concerning a reasonable alternative standard, and how the program was administered.
Employees: Questions About a Tobacco or Nicotine Surcharge?
If you paid a tobacco or nicotine surcharge through an employer-sponsored health plan—includinga surcharge based on a covered family member’s tobacco or nicotine use – you may contact Kehoe Law Firm to discuss your circumstances and potential legal rights.
For a free, no-obligation legal evaluation, contact:
Michael Yarnoff, Esq.
(215) 792-6676, Ext. 804
[email protected]
[email protected]
About Kehoe Law Firm, P.C.
Kehoe Law Firm, P.C. is a nationally-recognized, plaintiff-side class action law firm representing investors and consumers in matters involving securities fraud, corporate misconduct, mergers and acquisitions, antitrust violations, whistleblower claims, data breaches, consumer fraud, employment law violations, and retirement-plan mismanagement. Its attorneys have served as lead or co-lead counsel in major securities cases, recovering more than $10 billion for institutional and individual investors.
Kehoe Law Firm’s class action legal services are provided on a contingency-fee basis, meaning plaintiffs are not responsible for attorneys’ fees or litigation expenses. Any request for attorneys’ fees and expenses will be subject to court approval.
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