On December 21, 2009, President Obama signed into law the Department of Defense Appropriations Act, 2010 (H.R. 3326) ("the Act"). Among other things, this law extends the premium assistance for COBRA benefits created under the American Recovery and Reinvestment Act of 2009 ("ARRA"), which was discussed in our recent publication, "President Obama Signs Stimulus Plan with COBRA Expansion" (February 18, 2009).

Under ARRA, a 65% COBRA premium subsidy was available to those individuals who were eligible for continued medical coverage (other than a flexible spending account) under COBRA or similar state law because of a covered employee's involuntary termination of employment between September 1, 2008 and December 31, 2009 (assistance eligible individuals, or "AEIs"). Under ARRA, this COBRA premium subsidy was available to AEIs for up to nine (9) months. The newly signed Act extends eligibility for the COBRA premium subsidy for individuals whose employment is involuntarily terminated between September 1, 2008 and February 28, 2010. The Act also extends the maximum subsidy period from nine (9) months to fifteen (15) months.

Other changes made by the Act include the following:

  • Retroactive Coverage. The Act provides AEIs whose subsidy expired and who did not pay the next unsubsidized full premium the right to receive retroactive coverage by paying the subsidized premium amount in order to avoid loss of continuation coverage that was otherwise available.
  • Additional Notice Requirements. The Act requires plan administrators to provide further notice containing the information regarding amendments made by this Act to individuals who were AEIs at any time on or after October 31, 2009. This additional notice explaining the changes made by the Act must also be provided to individuals who experience a qualifying event (consisting of termination of employment) relating to continuation coverage on or after October 31, 2009.
  • Refunds and Credits. In the case of an individual who became an AEI before December 21, 2009 and who paid the full unsubsidized premium for COBRA continuation coverage when such coverage would have been subsidized in light of the extension provided under this Act, the plan administrator can offset future COBRA premiums or offer a refund check.

It is expected that the Department of Labor will be issuing information on the new notice requirements, and updated guidance, fact sheets, and frequently asked questions in the near future.