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Two benefits groups — the ERISA Industry Committee and the American Benefits Council — are asking the 8th U.S. Circuit Court of Appeals to strip class certification from two former employees of Compass Group USA who are suing the food services company over a tobacco-use surcharge.
The plaintiffs argue in pleadings filed in the U.S. District Court for the Western District of Missouri that the Compass Group violated anti-discrimination provisions in the Employee Retirement Income Security Act by making them pay $1,248 extra per year for health coverage, even if they completed a company-provided tobacco cessation program, if they were unable to stop using tobacco.
U.S. District Judge Stephen Bough agreed in April to let the plaintiffs represent three separate classes, including a class consisting of "all persons within the United States who paid Compass Group's tobacco surcharges from Oct. 9, 2018, through May 20, 2026."
The benefits groups say the appeals court should reverse the motion granting class certification.
"If this court does not review the District Court's order, the decision will provide a playbook for certifying ERISA tobacco surcharge class actions without considering threshold liability issues and limitations defenses," the benefits groups say in a brief filed June 10.
The Mehlberg case is only the second tobacco surcharge case to reach the class certification stage, and "wrongful certification of large ERISA class actions creates enormous pressure for defendants to settle even meritless claims so health plans and businesses are not harmed by immense defense costs and adverse judgments," the benefits groups say.
The same judge provided class certification for the only other group of plaintiffs that has received class certification in a tobacco surcharge case, and the employer in that case ended up settling for $5.5 million, the groups say.
"Certification of ERISA class actions may incentivize employers to eliminate wellness programs Congress wanted to encourage," the benefits groups say elsewhere in the brief. "That result may jeopardize the health of American workers and increase health care costs for participants and plan sponsors."
What it means: The outcome of the Mehlberg case could be important to any employer plans governed by ERISA that have concerns about class-action lawsuits.
The backdrop: The Affordable Care Act prohibits major medical coverage issuers or self-insured employer plans from charging people more for health coverage because of their health status.
The ACA does let employers impose a surcharge on tobacco users.
Current and former employer plan participants have filed about 70 suits alleging that their employers' tobacco surcharge rules failed to meet ERISA anti-discrimination standards.
Targets of the suits have included Campbell Soup, 7-Eleven and other well-known employers.
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