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As of January 1, 2019, There Are No Incentive Limits, Right?

The following article does NOT constitute legal advice and should not be used as such. It is for educational purposes only. Readers should retain legal counsel to obtain definitive answers.

People are asking me this question a lot lately. The thought behind this question is this: because there will no longer be a maximum incentive amount under the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA) as of January 1, 2019, employers are now free to tie any incentive amount to employee disclosure of health information.

Recall that under current ADA law, employers may impose an incentive equal up to 30% of the total cost of self-only coverage in exchange for the employee participating in a “medical exam” (i.e., a biometric screen) or a disability-related inquiry (i.e., health risk assessment (HRA)). Under GINA, the incentive maximum is the same, but it applies to incentivizing an employee’s spouse to participate in those activities.

As of January 1, 2019, thanks to the AARP v. EEOC case, the 30% incentive maximum is going away. This will leave no numerical benchmark for employers to decide what incentive level they can tie to employee or spousal participation in HRAs or biometric screens. Some employers have interpreted the absence of a benchmark as free reign to impose whatever incentive amount they choose. But doing so brings legal risk.

A review of the court decision in the AARP v. EEOC case explains why it is risky to assume that an incentive of greater than 30% of the total cost of self-only coverage is permissible after January 1, 2019. The court ruled against the EEOC’s decision to permit incentives of up to 30% of the total cost of self-only coverage for several reasons.

First, the court noted that both the ADA and GINA require, in the respective statutes, that employee (or spouse) disclosure of health information as part of a wellness program be “voluntary.” 42 USC §§ 12112(d)(4)(B) and 2000ff-1(b)(2)(A)-(B). The statutes do not define the word “voluntary.” However, before the 30% rule, the EEOC took the position that in order for a wellness program to be “voluntary,” employers could not condition the receipt of incentives on the employee’s disclosure of ADA- or GINA-protected information. Thus, before the EEOC created the 30% rule, the EEOC said no incentives could be tied to disclosing employee (or spouse) health information.

Of course, with the 30% rule, the EEOC changed its position, saying that employers could impose an incentive of up to 30% of the total cost of coverage and still fall within the ADA and GINA’s “voluntary” requirement. The court did not find the EEOC’s about face in its position convincing. The court noted that the EEOC did not explain why the 30% level is an appropriate measure of voluntariness; the EEOC did not consider any factors relevant to the financial and economic impact the 30% rule would have on individuals who would be affected by the rule. The court found that the EEOC ignored the concerns by those who wrote in opposition to the 30% rule that a 30% incentive level “was likely to be far more coercive for employees with lower incomes, and was likely to disproportionately affect people with disabilities specifically, who on average have lower incomes than those without disabilities.” Court opinion, at 26. The court pointed to a RAND study noting that “high powered” incentives of 20% or more might place a disproportionate burden on lower-paid workers. Id. According to the court, the “ADA’s voluntariness provision…requires that employees be protected from coerced disclosure of ADA-protected information” and that incentives are relevant to the question of whether disclosure is voluntary or not. Id. at 27 and 32.

So, the reason why the 30% incentive level is going away as of January 1, 2019 is because the court agreed with the AARP in concluding that the 30% incentive maximum was likely too high to satisfy the ADA’s “voluntary” requirement. If and when the EEOC creates new incentive rules, it must do so by justifying whatever number it chooses as meeting the ADA’s voluntary requirement. Most likely, this number will be lower than the 30% maximum, given the court’s concerns expressed in its opinion. As a result, employers who decide to impose incentives of more than 30% of the total cost of self-only coverage are doing so in disregard to the court’s reasoning in AARP v. EEOC, unless of course the employer can show that whatever incentive it imposes meets the ADA and GINA “voluntary” requirements.


Barbara Zabawa

Barbara J. Zabawa

President of the Center for Health and Wellness Law, LLC

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