On March 2, 2010, the COBRA subsidy provisions originally enacted under the American Recovery and Reinvestment Act, as extended in December, were once again extended by the Temporary Extension Act of 2010 (TEA). (Our December 2009 Client Alert provides a more detailed discussion of the December extension and expansion of the COBRA subsidy.) TEA requires immediate attention by employers and those assisting employers in administering group health plans.

TEA extends and modifies the application of the COBRA subsidy in four important respects. First, it extends the availability of the subsidy to employees (and their families) losing group health coverage due to an employee’s involuntary termination of employment occurring on or before March 31, 2010. Under the December extension, this period expired Feb. 28, 2010.

Second – and significantly – TEA expands eligibility for both the COBRA continuation coverage and subsidy to include individuals who (a) had a reduction of hours after Sept. 1, 2008 but did not elect COBRA coverage (or discontinued such an election) and (b) were later involuntarily terminated on or after March 2, 2010 (but not later than March 31, 2010). The involuntary termination for those individuals will be treated as a qualifying event entitling the individual to the COBRA subsidy after that involuntary termination, but the period during the reduction of hours will be counted for purposes of determining the duration of continuation coverage. Employers (or other group health plan administrators) are required to notify affected individuals of this new provision.

Third, TEA clarifies that a termination will be treated as involuntary if it is based on an employer’s reasonable determination for which the employer maintains supporting documentation (including an attestation).

Finally, although not expected to affect most employers or health insurance issuers, the legislation authorizes civil actions to enforce government determinations regarding an individual’s eligibility for the COBRA subsidy. If a plan fails to comply with a determination made by the applicable governmental agency that an individual is entitled to the COBRA subsidy, the appropriate agency may also assess a penalty of up to $110.00 per day.