UGN Class Action Lawsuit: Tobacco Surcharge Sparks ERISA Violation Claims

Case Overview: A class action lawsuit has been filed against UGN, Inc., alleging that its tobacco surcharge for employees violates ERISA.

Consumers Affected: UGN employees who were subject to the tobacco surcharge.

Court: U.S. District Court for the Northern District of Illinois, Eastern Division

A class action lawsuit has been filed against UGN, Inc., alleging that the car parts manufacturer unlawfully charged tobacco users an additional monthly fee under its health plan.

The lawsuit, filed by former UGN employee Charles Smith, claims that UGN violated the Employee Retirement Income Security Act (ERISA) by imposing a tobacco surcharge on employees who use tobacco products.

$96 Monthly Tobacco Surcharge Sparks Class Action Lawsuit

Under UGN's health plan, employees who are tobacco users were required to pay an additional $96 monthly surcharge, totaling $1,152 per year. This surcharge was imposed on top of the regular health insurance premium.

Smith, who worked as a Material Handler at UGN's facility in Monroe, Ohio, from approximately 2015 to 2020, paid the tobacco surcharge during his employment. He alleges that UGN failed to provide adequate notice of the surcharge and did not offer a reasonable alternative for employees who wish to avoid the fee.

UGN's Tobacco Surcharge Allegedly Violates ERISA's Anti-Discrimination Rule

Smith argues that UGN's tobacco surcharge directly violates ERISA's anti-discrimination provisions. These provisions prohibit any insurer or medical plan from imposing an additional charge based on a "health-status related factor," like tobacco use, unless it's part of a legitimate "wellness program."

For UGN's program to qualify as a legitimate "wellness program" under ERISA, it must provide a reasonable alternative for plan participants to avoid the additional fee for the entire year. This could include completing a smoking cessation program. Furthermore, the company is obligated to inform participants about the existence of such an alternative for tobacco users.

The complaint alleges that although UGN employees can seemingly avoid the $96 surcharge by completing a smoking cessation program, the company's health plan information documents fail to mention this alternative. In fact, the various benefits guides provided to participants are reportedly "silent" on the topic of smoking cessation programs or the possibility of reimbursement for the tobacco surcharge.

UGN Failed to Provide Notice of Reasonable Alternative Standard

The lawsuit alleges that UGN violated ERISA's notification requirements by failing to clearly inform health plan participants about how to avoid the tobacco surcharge. The company's health plan documents reportedly made no mention of smoking cessation programs or the possibility of reimbursement for the surcharge.

Furthermore, participants who had completed the smoking cessation program in recent years were still subject to the full surcharge, suggesting a lack of retroactive reimbursement or other adjustments.

The complaint emphasizes that UGN's "Team Member Benefits Guides" did not provide any information on how tobacco users could enroll in a tobacco cessation program to reduce their monthly medical deduction of $96. While the guides clearly outlined the additional costs associated with tobacco use for both exempt and nonexempt employees, they allegedly failed to mention the potential for avoiding these surcharges through cessation programs.

“These UGN Team Member Benefits Guide nowhere state that enrolling and successfully completing a tobacco cessation program can permit tobacco users to avoid the surcharge, whether retroactively or prospectively.”

In the UGN tobacco surcharge class action lawsuit, Smith is seeking to represent a nationwide class of individuals who paid UGN's tobacco surcharge in connection with any UGN health plan within the past six years.

Case Details

• Lawsuit: Smith v. UGN, Inc.
• Case Number: 1:24-cv-7908
• Court: U.S. District Court for the Northern District of Illinois, Eastern Division

Plaintiffs' Attorneys

• Paul M. Secunda (Walcheske & Luzi, LLC)
• Robert P. Kondras, Jr. (Hassler Kondras Miller LLP)

Have you experienced additional fees or surcharges on your health insurance plan? Share your experiences in the comments below.