President Obama has signed into law an extension of the COBRA premium subsidy for involuntarily terminated employees. The eligibility period for the COBRA subsidy is extended an additional two months (through Feb. 28, 2010) and the maximum period for receiving the subsidy for an additional six months (from nine to 15 months). Under the American Recovery and Reinvestment Act (“ARRA”), which became effective in February 2009, the U.S. government subsidizes 65% of the cost of group health insurance for employees and their qualified beneficiaries who lost coverage due to an involuntary termination of employment occurring between September 1, 2008 and December 31, 2009. The subsidy will now be available for involuntary terminations and losses of group health coverage occurring up until February 28, 2010.

In addition under ARRA, the maximum duration of the 65% subsidy was 9 months. Under the new bill, the maximum duration of the subsidy will be 15 months. Persons whose COBRA benefits have lapsed because of the previous 9-month maximum, or who lost the subsidy due to non-payment of their 35% share, will be allowed to continue COBRA coverage under the subsidy by making retroactive premium payments. Employers who terminate employees on or after October 31, 2009 will also be required to issue specific notices informing employees of the changes to the COBRA subsidy.