In July 2026, the recent wave of putative class actions challenging employer wellness programs that impose a premium surcharge on plan participants who use tobacco hit a wall when two federal district courts issued decisions dismissing the cases in their entirety, and a third federal district court issued a decision dismissing the plaintiffs’ primary claim. This trio of decisions—Spencer v. Campbell Soup Company, Williams v. Target Corporation and Mueller v. United Surgical Partners International, Inc.—join a growing body of authority holding that the plaintiffs’ claims fail as a matter of law.
This alert provides an update on recent developments in tobacco premium surcharge litigation, including the trio of July 2026 decisions favoring employers.
Plaintiffs File a Wave of Tobacco Premium Surcharge Litigation
Plan participants have filed a flurry of substantially similar lawsuits against employers in federal district courts across the country challenging their employers’ imposition of a premium surcharge on tobacco users. So far, plan participants have filed more than 80 of these lawsuits. Despite the issuance of several opinions dismissing the cases, as we have described here and here, the plaintiffs’ bar continues to file new lawsuits at a regular cadence. More than 30 tobacco premium surcharge cases have been filed since January 2026.
The key issue in these cases is whether employers can prospectively remove the premium surcharge when a participant who uses tobacco completes a wellness program’s “reasonable alternative standard,” which typically is a tobacco cessation course. Plaintiffs have argued that employers are required to provide retroactive reimbursement of premium surcharges—that is, a reimbursement of the total amount of premium surcharges they paid during a plan year before they completed the tobacco cessation course. Plaintiffs have also alleged that employers failed to comply with the wellness program regulation’s requirements regarding the disclosure of the terms of the wellness program.
Conflicting District Court Decisions
Over the past 18 months, federal district courts across the country have reached varying conclusions as to whether the plaintiffs’ allegations state claims for relief. This web of conflicting lower court decisions has resulted from uncertainty regarding the viability of the plaintiffs’ claims and differences in how the wellness programs at issue were structured.
We have primarily seen courts reach different conclusions as to whether ERISA requires retroactive reimbursement of premium surcharges, whether the administration of a wellness program amounts to fiduciary conduct, and whether the plaintiffs have alleged losses to the plan sufficient to state a claim for plan-wide relief.
While some courts have dismissed the cases in their entirety, others have allowed cases to survive employer motions to dismiss in whole or in part. Indeed, shortly after the Spencer, Williams, and Mueller decisions were issued, a federal district court in Missouri denied an employer’s motion to dismiss a tobacco premium surcharge complaint, holding that the plaintiffs’ allegations plausibly alleged ERISA violations.
Key Takeaways from Spencer, Williams, and Mueller
Spencer, Williams and Mueller marked key victories for employers. Key takeaways from these decisions are as follows:
- Article III Standing of Participants Who Never Completed a Tobacco Cessation Course to Challenge Lack of Retroactive Reimbursement: The District of New Jersey’s decision in Spencer is the first decision to hold that a plaintiff lacked Article III standing—that is, an injury-in-fact that was caused by the employer’s alleged ERISA violation and that could be redressed through a favorable court order—to challenge an employer’s wellness program. The plaintiff in Spencer, like nearly all of the plaintiffs in these cases, paid the tobacco premium surcharge but did not allege that he enrolled in a tobacco cessation course or that he would have done so if the wellness program provided retroactive reimbursement of premium surcharges. Instead, the plaintiff claimed that the premium surcharge was unlawful because the wellness program did not comply with all of ERISA’s requirements. Spencer rejected the plaintiff’s theory because he did not allege any facts showing that the wellness program’s alleged deficiencies affected him.
- Article III Standing to Challenge Disclosure of Wellness Program: Spencer held that the plaintiff lacked Article III standing to challenge alleged violations of the wellness program regulation’s disclosure requirements because he did not allege that the alleged violations affected him. Spencer adopted the reasoning of a court in the Eastern District of Missouri, which similarly dismissed a tobacco premium surcharge plaintiff’s disclosure claim for lack of Article III standing. We discussed that decision here.
- Retroactive Reimbursement Not Required: Spencer further held that the “full reward” language in the statute A does not require retroactive reimbursement of premium surcharges paid by participants who completed a tobacco cessation course. The Northern District of Texas reached the same conclusion in Mueller. Both courts emphasized a retroactive reimbursement requirement is not found in the statute and held that the tri-agencies’ regulatory preamble—which contemplates retroactive reimbursement of premium surcharges upon the completion of a wellness program’s requirement—is not legally binding and is not entitled to deference.
- Disclosure Claims – Physician Notification Requirement: Spencer also held that an employer’s notice of the wellness program does not need to include a statement that the recommendation of a participant’s personal physician will be accommodated. Although the wellness program regulation requires employers to make such a disclosure, this requirement is not found in the statute. Spencer applied the Supreme Court’s recent decision in Loper Bright Enterprises v. Raimondo to hold that the regulation’s physician accommodation requirement could not be harmonized with the statute. The District of Minnesota reached the same result in Williams. Spencer and Williams are the first courts to hold that the regulation’s physician accommodation disclosure requirement is not the best reading of the statute.
- Disclosure Claims – Summary Plan Description: Mueller allowed the plaintiff’s disclosure claim to proceed, even though the employer fully described the terms of its wellness program in the plan’s benefits guide. Mueller turned on facts unique to the case—the plan’s benefits guide expressly stated that it was not a “legal plan document.” The summary plan description mentioned the availability of the wellness program, but it did not describe the terms of the program. Because the wellness program affects participants’ rights and obligations under the plan, the court held that the summary plan description must describe the terms of the program in compliance with the wellness program regulation.
Appellate Court Guidance is Coming
Appellate court guidance may soon provide clarity regarding the viability of the plaintiffs’ theories of relief. Appeals of dismissals of tobacco premium surcharge cases are currently pending before the First, Second, Sixth and Seventh Circuits. We anticipate that appellate courts will be issuing decisions in these cases within the next year. These cases have garnered significant attention from industry groups, and the ERISA Industry Committee (ERIC) and the U.S. Chamber of Commerce have filed amicus briefs in support of employers.
What’s Next
The number of federal district courts that have rejected plaintiffs’ tobacco premium surcharge claims at the pleadings stage continues to grow. We nevertheless anticipate that plaintiffs will continue to file new lawsuits. Indeed, a plaintiff filed a new tobacco premium surcharge lawsuit just last week. We anticipate that appellate court decisions addressing the viability of the plaintiffs’ claims will be forthcoming in 2027, and these decisions may help to resolve whether this current wave of ERISA health plan litigation continues to move forward. We will keep monitoring this evolving area of ERISA litigation.
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