In a recent settlement, the Department of Labor (DOL) imposed over $160,000 in fines and penalties on an employer for the noncompliant tobacco surcharge they imposed through their plan’s Wellness Program.
A common Wellness Program design is to impose a premium surcharge to employees who use tobacco products. This surcharge is acceptable granted it follows the guidelines of the Health Insurance Portability and Accountability Act (HIPAA) and offers a reasonable alternative standard such as smoking cessation classes.
In this case, the employer requested any tobacco user employee to submit a “tobacco use certification form” during open enrollment. Any employee who certified tobacco use was charged a surcharge ranging between $2.50 and $15.00 per pay period. While they did offer free smoking cessation classes, where they failed was not waiving the surcharge upon completion of the class. The only way for the employee to avoid the surcharge was to certify they were no longer using a tobacco product, which is a violation of their fiduciary responsibilities.
This DOL fine is an important reminder of how these programs should be structured and administered. While the tobacco surcharge is outlined under HIPAA, other wellness regulations are provided through the Employee Retirement Income Security Act (ERISA), American Disabilities Act (ADA), and the Genetic Information Nondiscrimination Act (GINA). As you start the New Year, now is a good time to review your Wellness Program and ensure it is compliant for your upcoming benefit year.
Innovative has a rigorous compliance process to ensure all federal wellness regulations are followed for these programs. If you have any questions regarding this settlement or would like Innovative’s Workplace Wellness department to review or assist in structuring your program to ensure compliance, please contact our Wellness Department here.
