Lawsuit: Casey’s exploits employees with tobacco-use surcharge

(IOWA CAPITAL DISPATCH) - Casey’s General Store is being sued for allegedly exploiting its workers through the discriminatory practice of imposing a tobacco-use surcharge for health insurance coverage.

The surcharge, which is alleged to be $35 per pay period, amounts to an illegal “cash grab” by Casey’s that is masquerading as a wellness program, the lawsuit claims.

Filed in U.S. District Court for the Southern District of Iowa, the lawsuit seeks class-action status but is currently filed on behalf of one Casey’s employee, Elizabeth Blalock of Carroll County, Missouri.

Attorneys for Blalock allege that all Casey’s workers are automatically assumed to use tobacco unless they submit to a process in which they provide a sworn affidavit stating they do not. Any worker who fails to complete that process by a specified deadline is then required to pay “tobacco surcharge” for the entire calendar year, even if they do not use tobacco, the lawsuit claims.

In addition, Casey’s allegedly fails to provide the federally required options that would allow employees to avoid the surcharge. “The surcharge is structured as a penalty rather than a legitimate wellness incentive,” the lawsuit claims, since the workers “who miss the enrollment deadline are penalized for the entire year without any opportunity to later demonstrate compliance or avoid the surcharge.”

The lawsuit is based on the requirements of the Employee Retirement Income Security Act of 1974. ERISA allows employers to deduct from workers’ pay a tobacco-use surcharge, but only in connection with wellness programs that meet specific federal guidelines established in 2014. Those regulations state they are intended to ensure corporate wellness programs actually promote health as opposed to being a “subterfuge for discriminating based on a health factor.”

The lawsuit alleges Casey’s is illegally shifting the costs associated with less healthy workers from the company back to those same workers “who end up subsidizing their healthier colleagues.”

ERISA bars any health insurer or medical plan from discriminating against participants by charging premiums based on a “health-related factor,” including tobacco use. It does, however, allow group health plans to establish premium discounts or rebates” in return for adherence to programs that promote wellness and disease prevention.

Casey’s, the lawsuit claims, does not meet that standard.

“There is no smoking-cessation program, waiver, or alternative route for tobacco users” to avoid the surcharge, the lawsuit alleges. “The only avenue for smokers to avoid the surcharge is to quit smoking and then submit that change in status to the benefits department. Thus, tobacco users are penalized based solely on their status as smokers, which violates ERISA’s nondiscrimination provisions.”

The lawsuit goes on to allege that “allowing companies like Casey’s to exploit their participants and unlawfully extract millions from them under the guise of a wellness program that is, in reality, a cash grab, directly contradicts ERISA’s purpose of protecting workers from health-based discrimination. If unchecked, this practice would permit employers to manipulate wellness programs as revenue generating schemes rather than genuine health initiatives.”

According to the lawsuit, Blalock has forfeited to Casey’s $35 in earnings per pay period — roughly $910 per year — in order to maintain health coverage through the company.

Casey’s, which is headquartered in Ankeny, is one of the nation’s largest convenience store chains, with more than 2,600 locations in 16 states. There are more than 18,000 employees enrolled in the company’s health plan, according to court records.

In seeking class-action status for their lawsuit, the plaintiff’s attorneys argue the amount of money at issue exceeds $5 million, and the number of Casey’s workers who might potentially join the case is more than 1,000.

The lawsuit seeks unspecified damages for unlawful imposition of a discriminatory tobacco surcharge and breach of fiduciary duty. Casey’s has yet to file a response to the lawsuit. The company did not immediately respond Monday to requests for comment.

The plaintiff is represented by attorney Adam J. Wachal of the Koley Jessen law firm in Omaha.