President Obama today signed into law the economic stimulus bill, formally known as the American Recovery and Reinvestment Act of 2009 (the "2009 Recovery Act"). The 2009 Recovery Act contains an important expansion of health coverage continuation rights for employees who were or will be involuntarily terminated between September 1, 2008, and December 31, 2009. These involuntarily terminated employees qualify for a 65 percent reduction in their continuation health plan premiums. Their covered family members who elect continuation coverage also qualify for the same subsidy.

The timing of the law requires fast action by all employers that provide coverage to their employees under a health plan with continuation rights after termination of employment. In addition to plans subject to federal COBRA requirements, the 2009 Recovery Act also applies to state laws mandating continuation coverage under insured plans, as well as to governmental plans. For convenience, we will refer to all of these types of continuation coverage as "COBRA," as is done in the 2009 Recovery Act. However, employers should keep in mind that, unlike the general COBRA rules, this subsidy may apply to plans covering fewer than 20 employees.