On December 21, 2009 President Obama signed legislation extending the eligibility period for the COBRA premium subsidy for involuntarily terminated employees from December 31, 2009 to February 28, 2010.  In addition, the premium subsidy period has been extended from nine months to fifteen months.

The American Recovery and Reinvestment Act ("ARRA"), enacted in February 2009, provides that employees who are involuntarily terminated and lose group health coverage between September 1, 2008 and December 31, 2009 may be eligible for a reduced COBRA premium equal to 35% of their cost.  The remaining 65% is subsidized by the government via a payroll tax credit.  The premium subsidy period runs for a period of nine months, although COBRA coverage is generally available for a much longer period, e.g. 18 months.  Individuals above certain income levels are either ineligible or eligible for a reduced subsidy.

Under this new legislation, the eligibility period is extended from December 31, 2009 to February 28, 2010.  Therefore, employees who are involuntarily terminated but who would not lose their health coverage until after December 31, 2009 may now be eligible for the COBRA premium subsidy. This change is particularly helpful, for example, where an individual is involuntarily terminated in December 2009, but does not lose group health coverage until January 2010.  Without this change, such individuals would not be eligible for the COBRA premium subsidy since they would not have lost group health coverage until after December 31, 2009.

In addition, the premium subsidy period now runs for 15 rather than 9 months.  This extension applies automatically for those who are currently benefiting from the subsidy or who become eligible prior to February 28, 2010.

Furthermore, the extension directly affects those individuals whose initial subsidy period has expired.  For example, if an individual began receiving the subsidy in February 2009, his or her nine month period would have expired on October 31, 2009.  In this instance the individual could have either elected to pay the full COBRA premium or let his or her coverage lapse.  Under the new legislation, any individual whose coverage has lapsed on or after October 31, 2009 may retroactively pay his or her portion of the subsidized premium no later than the later of 60 days following December 21, 2009 or 30 days following notice of the extension's availability. Alternatively, if the individual has paid his or her full premium cost, he or she may now receive a refund of, or credit for, the additional COBRA premiums paid.

This legislation requires that individuals eligible for the premium subsidy on or after October 31, 2009 or who experience a qualifying event (consisting of an involuntary termination) receive a notice containing the additional information provided by these changes, e.g. extended eligibility period and extended premium subsidy period.  This notice must be provided within 60 days of enactment or within the normal notice requirements under COBRA for qualifying events that occur after December 21, 2009.  Therefore, employers should be reviewing their COBRA notices and updating them accordingly.  It is unclear if the US Department of Labor will be issuing revised model notices.

If you have any questions regarding the above or need assistance with the review and revision of COBRA notices, please feel free to contact Liza Hecht at lhecht@nfclegal.com or the Nukk-Freeman & Cerra attorney with whom you normally work.