Car parts manufacturer UGN Inc. signed a $299,000 class settlement in a lawsuit saying it wrongly charged tobacco-using workers an annual $1,152 penalty for health coverage without providing a valid way to avoid the fee.
It appears employees could have avoided the $96 monthly surcharge by completing a smoking cessation program, but the complaint alleged that the company’s health plan information documents did not mention this alternative. In fact, the filing claimed “the various benefits guides provided to participants are ‘silent’ on the topic of smoking cessation programs or the possible reimbursement of the tobacco surcharge.
Filed in October 2024 in the U.S. District Court for the Northern District of Illinois, the lawsuit argued the extra fee violated the federal Employee Retirement Income Security Act (ERISA), whose anti-discrimination provisions preclude any insurer or medical plan from assessing an additional charge based on a “health-status related factor,” which includes tobacco use unless the surcharge is part of a bona fide “wellness program.”
The proposed settlement would benefit 431 people who paid the tobacco surcharge in connection with UGN’s health plan between August 2018 and December 2024 and would amount to an estimated 36% of the workers’ damages.