Res-Care is a home- and community-based health services enterprise that serves individuals in need of specialized medical care. Res-Care offered its employees a health benefit plan. In January 2020, Res-Care began assessing a monthly $50 surcharge as part of the health benefit plan for employees who had used tobacco products within the previous six months (referred to as the “tobacco surcharge”). The tobacco surcharge increased to $100 per month if both the employee and their spouse/domestic partner used tobacco products. The purpose of the tobacco surcharge was to promote a healthy lifestyle and to provide an incentive not to use tobacco. Res-Care’s benefits catalogue explained that employees could avoid the tobacco surcharge by enrolling in and completing a tobacco cessation program through Res-Care’s Employee Assistance Program.
Plaintiff Minda Wiederhold worked at Res-Care and was a tobacco user. During open enrollment, she was required to respond to a tobacco usage question before selecting a health insurance plan. The tobacco attestation form directed enrollees to indicate “yes” or “no” to whether they had “used tobacco products any time in the last six months.”
Wiederhold discovered the tobacco surcharge when she reviewed her earnings statement in January 2020. According to Wiederhold, she did not contest it because she had to have health insurance. She also did not read the specific language referring to a tobacco cessation program.
On January 8, 2024, Wiederhold filed a class action lawsuit challenging the lawfulness of the tobacco surcharge and seeking monetary reimbursement for all participants who paid the tobacco surcharge. She alleged the tobacco surcharge violated the nondiscrimination provision set forth in the Employee Retirement Income Security Act (ERISA) because it imposed a premium on plan participants based on their health status. ERISA contains a nondiscrimination provision prohibiting group health plans, such as that offered by Res-Care, from charging participants a greater premium based on any health status-related factor. (29 U.S.C. section 1182(b).) However, there is an exception. A group health plan is allowed to offer a premium discount or rebate in exchange for participation in a bona fide wellness program. In other words, ERISA prohibits plans from requiring individuals to pay health-status-related premiums unless such premiums are avoidable through adherence to a bona fide wellness program. For the exception to apply, the plan must disclose the terms of the wellness program in all plan materials.
In litigation, Res-Care did not contest that the tobacco surcharge constituted a violation of ERISA’s nondiscrimination provision. However, Res-Care claimed Wiederhold brought the lawsuit too late and that the statute of limitations had lapsed. While the District Court found that Res-Care’s tobacco surcharge violated the nondiscrimination rules, the District Court ultimately agreed with Res-Care on the statute of limitations issue. The District Court found that the undisputed record showed that Wiederhold had gained actual knowledge of the facts essential to her claim in January 2020, which triggered ERISA’s three-year statute of limitations, as opposed to ERISA’s longer six-year statute of limitations that applies when the plaintiff does not gain actual knowledge of the breach or violation. Since Wiederhold initiated the lawsuit one year after the three-year statute of limitations ended, the District Court rendered her claims untimely and granted Res-Care’s motion for summary judgment.
Wiederhold v. Res-Care, Inc. (S.D.Ind. Mar. 31, 2026, No. 4:24-cv-00003-SEB-TAB) 2026 WL 874928.
Note: While ERISA does not apply to governmental plans, there could be other legal risks with charging employees a surcharge or higher rate based on their health status. If a benefit is more costly for employees because of their health status, which could arise from a disability, there are risks of disability discrimination under the Americans with Disabilities Act and the Fair Employment and Housing Act.