As part of the federal American Recovery and Reinvestment Act stimulus package, certain low to moderate income employees (as well as their spouses and dependent children) who were/are involuntarily terminated between September 1, 2008 and December 31, 2009 are eligible for a 65 percent subsidy for the cost of health care continuation coverage under COBRA for up to 9 months following termination. Employers must pay for the subsidy, but will be reimbursed through a payroll tax credit. The new law also gives employers the option to allow terminated employees to switch from a more expensive group health plan program (such as a PPO) to less expensive alternative (such as a HMO). Employers must notify all employees who have a qualifying event during the period of eligibility (September 1, 2008 through December 31, 2009) of their eligibility for the subsidy, including those who previously declined COBRA coverage.

Fenwick & West's comprehensive summary of the subsidy is available at http://www.fenwick.com/docstore/Publications/Corporate/Execu-Comp_02-23-09.pdf and the federal Department of Labor dedicated web page on the topic is available at http://www.dol.gov/ebsa/cobra.html.