The American Recovery and Reinvestment Act of 2009 (ARRA), was signed into law on February 17, 2009, by President Obama. The ARRA creates a nine-month, government-funded subsidy for the COBRA continuation premiums for employees who lose health care coverage as a result of an involuntary termination of employment between September 1, 2008 and December 31, 2009.

The subsidy is a 65% reduction in the amount of the premium an eligible individual is required to pay for up to 9 months of COBRA continuation coverage. An eligible individual will pay 35% of the COBRA premium to the employer, health plan or insurer. The employer, health plan or insure pays the remaining 65% of the COBRA premium and is reimbursed in the form of a credit against the payroll taxes the employer, health plan or insurer is required to pay.

Eligible individuals whose employment involuntarily terminated on or after September 1, 2008 and before February 17, 2009 and who declined to elect COBRA coverage must be provided with another COBRA election notice. Any COBRA coverage elected will be effective with the first coverage period after February 17, 2009. This election does not extend the total period of otherwise available COBRA coverage.

Employers subject to COBRA have Group Health Plans with 20 or more employees on more than 50% of its typical business days in the previous calendar year. Both full and part-time employees are counted to determine whether a plan is subject to COBRA.