P.L. 111-118, the Defense Appropriations Bill, signed into law on December 19, 2009, extends the period for the COBRA 65% discount for terminated employees from 9 to 15 months and also makes employees terminated after December 31, 2009 and before March 1, 2010 eligible for the 65% COBRA assistance subsidy. The result is that affected employees will be able to maintain COBRA coverage by paying only 35% of the COBRA premium for an additional 6 months and that individuals terminated during the first two months of 2010 will also now be eligible for the 65% COBRA subsidy.

The new law requires employers to send out an additional notice to all affected employees, including employees who had ceased paying for COBRA after the initial 9 month subsidy expired, and employees who continued COBRA coverage and paid the full rate (who are now entitled to a refund). Generally, the notice must be sent to an "assistance eligible individual" by February 17, 2010. One of the effects of the extension is that individuals that lost COBRA coverage as a result of failure to pay premiums must now be given a chance to pay the 35% subsidized COBRA premium retroactively for any period after October 31, 2009 and regain COBRA coverage for that period. In addition, an eligible individual may reinstate COBRA coverage prospectively by paying the premium by the later of February 17, 2010, or 30 days after receiving notice of the extension from the employer.

Look for model notices to be issued by the Department of Labor in the near future.