On Dec. 19, 2009, the COBRA premium subsidy provisions under the American Recovery and Reinvestment Act (ARRA) were extended beyond Dec. 31, 2009 and expanded. This extension and expansion are already effective and will require immediate attention by employers and those who assist employers in administering their group health plans.

Earlier this year, ARRA established that “assistance eligible individuals” were entitled to receive a 65 percent subsidy for continuation coverage premiums for up to nine months. Under ARRA, an assistance eligible individual is any COBRA qualified beneficiary who elects COBRA coverage and who: (1) has a loss of group health coverage as a result of an involuntary termination of employment (other than for gross misconduct); and (2) became eligible for COBRA coverage between Sept. 1, 2008 and Dec. 31, 2009.

Under the new law, the maximum period of time for which an assistance eligible individual can receive the COBRA subsidy has been increased from nine months to 15 months. In addition, the subsidy eligibility period is extended to any COBRA qualifying event that is an involuntary termination of employment that occurs on or before Feb. 28, 2010 (even if COBRA continuation coverage would begin after Feb. 28, 2010).

Because the original nine month period of COBRA premium subsidy ended Nov. 30, 2009 and because the Dec. 31, 2009 ending date for eligibility for the original subsidy created the possibility that individuals involuntarily terminating employment in December 2009 might not be eligible for the COBRA subsidy, the new law addresses what happens during this “transition period.” Specifically, any assistance eligible individual who paid the full COBRA premium during the transition period will be entitled to a refund of the excess premium, and any individual who did not pay for COBRA coverage during this transition period will be provided an additional period of time to pay the subsidized COBRA premium amount. For any period of coverage during an assistance eligible individual’s transition period, an assistance eligible individual shall be treated as having timely paid for COBRA coverage if he or she: (1) was covered under COBRA coverage for the period immediately preceding the transition period; and (2) pays the amount of subsidized premium not later than Feb. 17, 2010 (or, if later, 30 days after a new COBRA notice explaining the transition period rules is provided).

Plan administrators must provide notice of the new extension rights to individuals who became assistance eligible individuals on or after Oct. 31, 2009 or who experience a qualifying event involving termination of employment on or after that date. The notice must be provided not later than Feb. 17, 2010 (60 days after the Act’s enactment date) or, in the case of a qualifying event occurring after Dec. 19, 2009, consistent with the general timing requirements regarding COBRA notices.