California Employer Health Insurance: A Guide for Businesses

Employer-sponsored health insurance is one of the most common ways Californians receive health coverage. For businesses, offering group health insurance involves understanding who qualifies, how premiums are shared, which employees can enroll and how California and federal rules apply.

Quick answer: California businesses can offer group health insurance to eligible employees through private insurance companies or, for qualifying small employers, through Covered California for Small Business. California generally defines the small-group health insurance market as businesses with 1 to 100 employees. Different requirements can apply depending on the size of the business, the insurance arrangement and the employees being covered.

For a broader overview of plan options, costs, eligibility and employer considerations, see our complete guide to small business health insurance in California.

What Is Employer-Sponsored Health Insurance?

Employer-sponsored health insurance is health coverage offered by a business or organization to eligible employees and, depending on the plan, their eligible dependents.

The employer selects the health insurance options available to employees and generally contributes toward the cost of employee coverage.

Employees who enroll typically pay their portion of the premium through payroll deductions.

The amount paid by the employer and employee depends on the employer's contribution strategy and the health plans being offered.

What Is Group Health Insurance?

Group health insurance covers eligible members of a defined group, such as employees of a business.

Instead of each employee independently purchasing individual health insurance, the employer establishes a group health plan and eligible employees can choose whether to enroll in the coverage available to them.

Depending on the employer and insurance arrangement, employees may have access to one plan or several plan options.

What Is Considered a Small Business for Health Insurance in California?

California's small-group health insurance market generally includes employers with 1 to 100 employees.

However, simply having between 1 and 100 employees does not necessarily mean every business automatically qualifies for every small-group insurance program.

Insurance companies and programs such as Covered California for Small Business can have additional eligibility, documentation, contribution and employee participation requirements.

Learn more in our guide to Small Business Health Insurance in California: Eligibility, Costs and Requirements.

Can a Business With One Employee Get Group Health Insurance?

A qualifying California business may be able to establish small-group health coverage with one eligible employee, but specific eligibility rules apply.

For example, Covered California for Small Business requires at least one W-2 employee who is not the owner or the owner's spouse.

A business consisting only of an owner, or only an owner and the owner's spouse, generally would not satisfy that employee requirement for Covered California for Small Business.

Sole proprietors without eligible employees generally obtain coverage through the individual health insurance market rather than the small-group market.

What Is Covered California for Small Business?

Covered California for Small Business, commonly called CCSB, is California's health insurance marketplace for qualifying small employers.

Eligible employers can use CCSB to offer health insurance options to their employees.

General CCSB eligibility requirements include:

• 100 or fewer full-time-equivalent employees
• At least one W-2 employee who is not the owner or the owner's spouse
• A majority of eligible employees working or living in California under applicable program rules
• Offering coverage to eligible employees
• Meeting applicable employer contribution requirements
• Meeting applicable employee participation requirements

Businesses do not have to use Covered California for Small Business to obtain California small-group health insurance. Employers may also obtain group coverage through insurance companies and licensed insurance agents or brokers outside the CCSB marketplace.

What Types of Health Plans Can Employers Offer?

California employers may have access to different types of health plans depending on the insurance company, location and group.

Common plan types include:

• Health Maintenance Organization (HMO) plans
• Preferred Provider Organization (PPO) plans
• Other network-based plan designs available from insurance companies

Plans can differ in premiums, deductibles, copayments, coinsurance, provider networks and prescription drug coverage.

What Is an HMO?

A Health Maintenance Organization, or HMO, generally provides coverage through a defined network of doctors, hospitals and other health care providers.

Depending on the plan, members may select a primary care physician who helps coordinate their care, and referrals may be required for certain specialists.

Except for applicable emergency, urgent or other protected care, services received outside the HMO network may not be covered.

What Is a PPO?

A Preferred Provider Organization, or PPO, generally provides a network of preferred health care providers while also allowing members to receive certain covered services outside the network.

Members typically pay less when using participating network providers and may pay more for covered out-of-network care.

PPO plans also generally provide greater flexibility to see specialists without obtaining a referral, although the exact rules depend on the plan.

How Much Does an Employer Pay Toward Health Insurance?

The amount an employer contributes toward employee health insurance depends on the employer's contribution strategy and the requirements of the insurance arrangement being used.

Employers commonly pay a portion of the employee's monthly premium, while the employee pays the remaining amount.

An employer may also choose to contribute toward dependent coverage, although the rules and contribution requirements can differ depending on the program and insurer.

For Covered California for Small Business, participating employers generally must contribute at least 50% of the premium for the lowest-cost employee-only plan in the selected reference metal tier.

Learn more about the factors that affect premiums in our guide to How Much Does Small Business Health Insurance Cost in California?

Do Employees Have to Pay for Part of Their Health Insurance?

Employees often pay a portion of their monthly health insurance premium, although the amount depends on how much the employer contributes.

For example, an employer might establish a fixed percentage or dollar contribution toward employee coverage. The employee would then be responsible for the remaining premium associated with the plan they select.

Employees may also pay additional premiums to enroll spouses, children or other eligible dependents when dependent coverage is available.

Do California Employers Have to Offer Health Insurance?

Not every California employer is required to offer health insurance.

Under the federal Affordable Care Act's employer shared responsibility provisions, businesses with fewer than 50 full-time employees, including full-time-equivalent employees for purposes of determining employer size, are generally not subject to the federal employer mandate.

Businesses that meet the definition of an Applicable Large Employer may be subject to federal requirements involving the health coverage offered to full-time employees and their dependents.

The calculation is more complicated than simply counting the number of people on payroll because hours worked by part-time employees can affect the full-time-equivalent calculation.

See Are California Employers Required to Offer Health Insurance? for a detailed explanation.

Can Employers Offer More Than One Health Plan?

Depending on the insurance arrangement, employers may be able to offer employees multiple health plan choices.

This can allow employees to select coverage based on factors such as:

• Monthly premium
• Provider network
• Deductible
• Copayments and coinsurance
• HMO or PPO plan structure
• Prescription drug coverage

The number and type of plans available depend on the insurance company, employer group and program being used.

What Are Bronze, Silver, Gold and Platinum Plans?

Health insurance plans may be organized into metal tiers such as Bronze, Silver, Gold and Platinum.

The metal tier generally reflects how health care costs are divided between the health plan and members across a standard population. It does not represent the quality of doctors or medical care.

In general, plans with higher metal levels tend to have higher premiums and lower member cost-sharing, while lower metal levels tend to have lower premiums and higher cost-sharing.

Actual costs depend on the specific plan and the health care services an employee uses.

Who Is Eligible for Employer Health Insurance?

Employee eligibility depends on the employer's plan and applicable insurance rules.

Factors can include:

• Employment status
• Hours worked
• Waiting periods
• Employee classification
• The employer's eligibility rules
• The requirements of the insurance company or program

Eligible dependents may also be allowed to enroll in the employer's group health plan.

See our guide to Employee Health Insurance Eligibility in California: Waiting Periods, New Hires and Qualifying Events.

When Can Employees Enroll?

Employees generally have opportunities to enroll when they first become eligible, during the employer's annual open enrollment period or following certain qualifying life events.

Qualifying events can include circumstances such as marriage, birth or adoption of a child, or loss of other qualifying health coverage.

Enrollment deadlines can apply, so employees should notify the employer or benefits administrator promptly after a qualifying event.

Can Employees Add Their Family Members?

Employer health plans commonly allow eligible employees to enroll qualifying dependents.

Depending on the plan, eligible dependents can include:

• A spouse
• Children
• Other dependents who satisfy applicable eligibility rules

The employer's contribution toward dependent premiums can differ from its contribution toward employee-only coverage.

Can an Employee Decline Employer Health Insurance?

Employees generally do not have to enroll simply because an employer offers health insurance.

An employee may decline coverage because they have other health insurance, such as coverage through a spouse's employer, Medicare, Medi-Cal or another source.

Waiving coverage can affect an employer's participation calculation under certain small-group insurance arrangements, although employees with qualifying alternative coverage may be excluded from that calculation under applicable rules.

Can Employees Get Covered California Instead of Employer Coverage?

An employee can purchase individual coverage through Covered California, but access to premium tax credits depends on the employee's circumstances.

An offer of affordable employer-sponsored coverage that meets applicable federal standards can affect whether an employee or eligible family members qualify for financial assistance through the individual marketplace.

Employees should not assume they will qualify for Covered California financial assistance simply because they decline an employer health plan.

What Happens When an Employee Loses Employer Coverage?

Losing employer-sponsored health insurance can create an opportunity to enroll in other health coverage.

Depending on the circumstances, options may include:

• Another employer-sponsored plan
• COBRA or Cal-COBRA continuation coverage when applicable
• Individual health insurance
• Covered California
• Medi-Cal, if eligible
• Medicare, if eligible

Loss of qualifying employer-sponsored coverage can create a Special Enrollment Period for individual health insurance, but enrollment deadlines apply.

What Happens When an Employee Turns 65?

Employees who continue working at age 65 may become eligible for Medicare while still covered by an employer group health plan.

How Medicare coordinates with employer coverage can depend on factors including employer size and whether the coverage is based on current employment.

An employee should not automatically assume that turning 65 means employer coverage must end or that Medicare enrollment should always be delayed.

See our Medicare guide to Working Past 65: Do You Need to Sign Up for Medicare? for more information.

How Do Businesses Get Group Health Insurance Quotes?

Group health insurance pricing is based on information about the business and eligible employees.

Information commonly needed to prepare a quote can include:

• Business location
• Number of eligible employees
• Employee ages or dates of birth
• Employee home ZIP codes
• Dependent information when applicable
• Requested effective date
• Preferred health plans or provider networks
• Employer contribution strategy

Employers can obtain coverage through insurance companies, Covered California for Small Business when eligible, or licensed health insurance agents and brokers.

What Should Employers Compare When Choosing Group Health Insurance?

Premium is important, but it is only one part of comparing employer health plans.

Employers may also want to review:

• Provider networks
• Hospital systems
• HMO and PPO options
• Deductibles
• Copayments and coinsurance
• Prescription drug benefits
• Employee premium contributions
• Dependent coverage costs
• Plan availability by employee location
• Enrollment and administration requirements

A group with employees in several California regions may have different considerations from a business whose employees all live and work in one area.

Can Small Businesses Get a Tax Credit for Health Insurance?

Some qualifying small businesses may be eligible for the federal Small Business Health Care Tax Credit when purchasing qualifying coverage through Covered California for Small Business.

Eligibility for the tax credit is more restrictive than general eligibility for small-group health insurance.

Factors can include the number of full-time-equivalent employees, average employee wages, the employer's premium contribution and where the coverage is purchased.

Qualifying for small-group insurance does not automatically mean a business qualifies for the tax credit.

Frequently Asked Questions

How many employees do you need for group health insurance in California?

California's small-group market generally includes employers with 1 to 100 employees, but specific eligibility requirements apply. For example, Covered California for Small Business requires at least one W-2 employee who is not the owner or the owner's spouse.

Can a small business offer health insurance in California?

Yes. Qualifying small employers can offer group health insurance through insurance companies or, when eligible, through Covered California for Small Business.

Do California employers have to pay for employee health insurance?

Contribution requirements depend on the insurance arrangement. For example, employers participating in Covered California for Small Business generally must contribute at least 50% toward the premium of the lowest-cost employee-only plan in the selected reference metal tier.

Are businesses with fewer than 50 employees required to offer health insurance?

Businesses with fewer than 50 full-time employees, including full-time-equivalent employees for purposes of determining employer size, are generally not subject to the federal Affordable Care Act employer shared responsibility provisions.

Can employees choose different health plans?

Depending on the employer's insurance arrangement, employees may be able to choose among multiple available plans. Available choices depend on the insurance company, employer and program.

Can an employee decline employer health insurance?

Generally, yes. Employees may decline employer coverage, although declining an employer plan can affect eligibility for financial assistance through the individual health insurance marketplace.

Can employers enroll in group health insurance at any time?

Small employers may generally establish group health insurance during the year, subject to applicable carrier or program enrollment requirements and effective-date rules. Employee enrollment after the group is established generally occurs when employees become eligible, during open enrollment or after applicable qualifying events.

This article is for general educational and informational purposes and is not legal, tax or accounting advice. Employer health insurance eligibility, contribution requirements, participation requirements, tax rules and coverage options can vary based on employer size, insurance company, plan and individual circumstances and may change over time. Employers should review current carrier, Covered California and applicable government guidance for requirements that apply to their business.