If You Got ’Em: Shedding a Light on Tobacco Cessation Programs

For American employers, new federal guidance, recent lawsuits and questions about program quality have added to more than a decade of uncertainty about tobacco cessation programs.

In late August, the U.S. Department of Labor (DOL) and its Employee Benefits Security Administration posted a guidance document clarifying rules and legal concerns with health-contingent wellness plans. One key clarification is that employers who add a surcharge to health insurance premiums for smokers don’t need to issue retroactive refunds if an employee completes a tobacco cessation program mid-year.

A lack of clarity around this point in previous regulations and guidance “caused greater confusion and has led to many recent lawsuits,” wrote Michaela Taylor Sheppard, an attorney and employee benefits associate at law firm Bricker Graydon Wyatt, who called the new guidance “welcome relief.” However, she added that it “does not eliminate all compliance concerns.”

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More Than a Decade of Confusion

The Affordable Care Act allows employers to add a surcharge to tobacco users’ health insurance premiums. This is an exception to federal laws that stipulate plans can’t base individuals’ premiums on information about their health. However, employers that add tobacco surcharges also must offer a “reasonable alternative standard,” such as smoking cessation courses or nicotine counseling, that remove the surcharges upon completion even if participants don’t quit smoking.

Lawsuits began shortly after these provisions first went into effect in 2014, arguing that they violate the Employee Retirement Income Security Act (ERISA) and other statutes. Some, including a $5 million class-action lawsuit filed this summer against restaurant chain Waffle House for its tobacco insurance surcharge, directly involve the question of retroactive refunds. Another class-action lawsuit against Meijer was dismissed by a federal judge in September, who noted that the grocery chain met its obligations by providing a tobacco cessation program to waive the fee. Two other federal courts dismissed additional ERISA tobacco surcharge challenges in July.

While the Aug. 26 guidance stresses that the DOL won’t seek action against employers that don’t provide retroactive refunds, tobacco cessation advocates note this lost incentive could be yet another barrier for those trying to quit.

“Maybe if it’s late in the year, [not getting] that benefit back will be another reason to put off another quit attempt,” said Anne DiGiulio, the senior director of nationwide tobacco cessation and health policy at the American Lung Association.

An Uncertain Landscape

Amid the uncertainty, employer-offered smoking cessation programs are still a common rewards offering. WorldatWork’s Total Rewards Inventory of Programs and Practices research showed 84% of responding organizations provided tobacco/smoking cessation support to some or all of their employees in 2025, compared to 77% in 2023. Research from the Society for Human Resource Management (SHRM) showed a different trendline, with 20% of surveyed employers offering smoking cessation programs in 2025, vs. 34% in 2021.

Complicating matters, at least nine states and the District of Columbia have enacted or are considering legislation limiting premium differentials. Virginia, for example, first eliminated the ability of health insurance carriers to include a surcharge for tobacco use effective Jan. 1, 2024; subsequent legislation will make this permanent in January 2027. According to a legislative report, monthly premiums for Virginia tobacco users fell by between $25 and $123 in 2024, while premiums for all members rose by less than $4 as a result.

Even so, this summer’s guidance signals an effort to “make clear to sponsors and issuers that, as long as they are offering reasonably designed and otherwise nondiscriminatory wellness programs, they will not be penalized for wanting to help motivate the people they cover to make efforts to improve their health,” said Daniel Aronowitz, the DOL’s assistant secretary for employee benefits security, in a statement.

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