QUESTION: Our company is thinking about implementing a tobacco-use premium surcharge next year. If an employee were to complete a tobacco-cessation program midyear, would the employee be entitled to a retroactive refund of tobacco-use premium surcharges paid earlier in the year?

ANSWER: Although recent court decisions are mixed, cautious group health plan sponsors should assume that participants who complete a cessation-based reasonable alternative standard (RAS) midyear are entitled to the full value of that year’s tobacco-related reward, requiring a retroactive refund or equivalent credit. When a participant completes a compliant, cessation-based RAS during the plan year, agency guidance under HIPAA’s wellness program rules supports providing the participant with the full value of the plan year’s tobacco-use reward, rather than ending the surcharge prospectively. Some courts, however, have upheld prospective-only approaches, particularly if participants had a full-year opportunity to avoid the surcharge and the plan’s notices were otherwise adequate.

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