Small Business Health Insurance in California: Eligibility, Costs and Requirements

Small business health insurance allows California employers to offer health coverage to eligible employees and, depending on the plan, their eligible dependents. Understanding who qualifies for small-group coverage, how employers and employees share premiums and what participation requirements apply can make it easier to establish and maintain a group health plan.

Quick answer: California's small-group health insurance market generally covers employers with 1 to 100 employees. A qualifying business may purchase small-group coverage directly through insurance carriers or, if eligible, through Covered California for Small Business. Specific eligibility, employer contribution and employee participation requirements can depend on the carrier or program.

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

What Is Small Business Health Insurance?

Small business health insurance is employer-sponsored group health coverage offered by a qualifying small employer to eligible employees.

Instead of employees purchasing individual health insurance independently, the business establishes a group health plan and eligible employees are given an opportunity to enroll.

The employer generally contributes toward the cost of employee coverage, while enrolled employees pay any remaining portion of their premiums.

For a broader overview, see our California Employer Health Insurance Guide.

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.

This is an insurance-market definition and should not be confused with other definitions of a small business that may be used for taxes, employment law or other government programs.

Specific health insurance programs and carriers can also have additional eligibility requirements beyond the size of the business.

How Many Employees Do You Need for Small Business Health Insurance?

A qualifying California business may be able to establish group health insurance with as few as one eligible employee, but the owner generally cannot simply count themselves as the employee for every small-group arrangement.

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 sole proprietor without an eligible employee generally obtains coverage through the individual health insurance market rather than establishing a small-group health plan.

Can an Owner and Spouse Get Small Business Health Insurance?

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

If the business has at least one qualifying W-2 employee in addition to the owner or owner's spouse, the business may potentially qualify if the other applicable requirements are met.

Eligibility can depend on the specific insurance arrangement, so businesses should confirm current carrier or program requirements before applying.

What Is Covered California for Small Business?

Covered California for Small Business, commonly called CCSB, is California's marketplace through which qualifying small employers can offer group health insurance.

CCSB can provide eligible businesses with access to participating health insurance carriers and plan choices for their employees.

General eligibility requirements include:

• Having 100 or fewer full-time-equivalent employees
• Having at least one W-2 employee who is not the owner or the owner's spouse
• Offering coverage to eligible employees
• Meeting applicable employee participation requirements
• Meeting applicable employer contribution requirements
• Satisfying applicable California employee-location requirements

Eligibility requirements can change, so employers should verify current CCSB rules when establishing coverage.

Do Small Businesses Have to Use Covered California?

No. Covered California for Small Business is one option for eligible California employers, but it is not the only way to obtain small-group health insurance.

Businesses may also obtain group health insurance through participating insurance carriers and licensed health insurance agents or brokers outside the Covered California for Small Business marketplace.

The plans, carrier choices and enrollment arrangements available can vary depending on the market and business location.

Do Small Businesses Have to Offer Health Insurance?

Small businesses are generally not required to offer health insurance solely because they employ workers.

Under the federal Affordable Care Act's employer shared responsibility provisions, employers 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.

Employers that meet the definition of an Applicable Large Employer can have additional federal responsibilities.

Learn more in Are California Employers Required to Offer Health Insurance?.

Why Do Small Businesses Offer Health Insurance if It Is Not Required?

A small employer may choose to offer health insurance even when it is not legally required to do so.

Reasons businesses may offer coverage include:

• Recruiting employees
• Retaining existing employees
• Providing a competitive employee benefits package
• Helping employees obtain access to group health coverage
• Contributing toward employees' health insurance costs

Whether offering group health insurance makes sense depends on the employer's workforce, budget and business objectives.

How Much Does Small Business Health Insurance Cost in California?

There is no single price for small business health insurance in California.

Premiums can vary based on factors such as:

• Employee and dependent ages
• Employee and dependent locations
• Insurance carrier
• Provider network
• Plan and metal tier
• Number of people enrolling
• Employer contribution strategy

The total group premium and the amount the employer actually pays are not necessarily the same.

An employer may contribute a portion of employee premiums while employees pay the remaining amount through payroll deductions.

See How Much Does Small Business Health Insurance Cost in California? for a detailed breakdown.

How Much Does an Employer Have to Contribute?

Employer contribution requirements can depend on the carrier or program through which coverage is established.

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

An employer can choose to contribute more than the minimum required amount.

Employers may also choose to contribute toward dependent premiums, subject to applicable plan and program rules.

What Are Employee Participation Requirements?

Group health insurance arrangements may require a certain level of employee participation.

Participation requirements help ensure that a group includes a reasonable portion of eligible employees rather than primarily employees who expect significant medical expenses.

However, not every eligible employee who declines the employer plan necessarily counts against participation.

Employees who waive coverage because they have other qualifying health insurance, such as coverage through a spouse's employer, may be treated differently under applicable participation rules.

Participation requirements can vary by carrier and program and should be confirmed when a business applies for coverage.

Can Employees Decline the Company's Health Insurance?

Generally, yes. An employee can usually decline employer-sponsored health insurance.

Employees may already have coverage through:

• A spouse's employer
• A parent's health plan when eligible
• Medicare
• Medi-Cal
• Another qualifying source

Employers should maintain appropriate records of employee elections and waivers according to their plan's administrative requirements.

Who Is Eligible for a Small Business Health Plan?

Eligibility depends on the employer's plan rules and the applicable carrier or program requirements.

Factors can include:

• Whether the individual is an eligible employee
• Employment classification
• Hours worked
• Completion of an applicable waiting period
• Whether the employee works or resides in an eligible service area

Eligible employees may also be able to enroll qualifying dependents.

See Employee Health Insurance Eligibility in California: Waiting Periods, New Hires and Qualifying Events for more information.

Can Part-Time Employees Get Health Insurance?

Whether part-time employees are eligible for an employer's group health plan depends on the employer's eligibility rules and the requirements of the insurance arrangement.

Some employers may choose to offer coverage to additional employee classes when permitted, while others limit eligibility based on applicable hours or employment classifications.

Employers should apply eligibility rules consistently to similarly situated employees.

Can Employees Add Their Spouse and Children?

Small-group health plans commonly allow eligible employees to enroll qualifying dependents, subject to the plan's eligibility rules.

Eligible dependents can include spouses and children.

The employee may be responsible for some or all of the additional premium associated with dependent coverage depending on the employer's contribution policy.

Can a Small Business Offer Multiple Health Plans?

Depending on the carrier or program, a small employer may be able to offer employees more than one health plan.

Multiple plan choices can allow employees to compare factors such as:

• HMO versus PPO coverage
• Provider networks
• Monthly premiums
• Deductibles
• Copayments
• Prescription drug benefits
• Metal tiers

The number of plans an employer can offer depends on the insurance arrangement being used.

What Are the Metal Tiers for Small Business Health Insurance?

Many California small-group health plans are categorized into metal tiers such as Bronze, Silver, Gold and Platinum.

The metal level generally describes how costs are divided between the health plan and members across a standard population. It does not indicate the quality of doctors, hospitals or medical care.

In general:

• Bronze plans tend to have lower premiums and higher member cost-sharing
• Silver plans generally provide a middle range of premium and cost-sharing
• Gold plans tend to have higher premiums and lower member cost-sharing
• Platinum plans generally have higher premiums and lower member cost-sharing

Actual benefits and costs vary by plan.

Should a Small Business Choose an HMO or PPO?

Neither plan type is automatically better for every business.

HMO plans generally use a defined provider network and may require members to coordinate certain care through a primary care physician.

PPO plans generally provide more flexibility to use providers both inside and outside the preferred network, although out-of-network services can result in substantially higher costs.

Businesses with employees in multiple geographic areas should pay particular attention to provider-network availability when comparing plans.

Can a Small Business Get a Health Insurance Tax Credit?

Some qualifying small employers may be eligible for the federal Small Business Health Care Tax Credit.

For eligible for-profit employers, the credit can be worth up to 50% of qualifying employer premium contributions. Eligible tax-exempt employers may qualify for a credit of up to 35%.

The credit is generally available for no more than two consecutive taxable years and has requirements involving employer size, average employee wages, employer premium contributions and the way coverage is purchased.

Eligibility for small-group health insurance does not automatically mean an employer qualifies for the tax credit.

Businesses should consult an appropriate tax professional regarding their eligibility and calculation of any tax credit.

When Can a Small Business Start Health Insurance?

Small businesses can generally establish group health coverage during the year, subject to the enrollment procedures and effective-date requirements of the carrier or program.

Once coverage is established, employees generally enroll when first eligible, during the group's annual open enrollment period or after an applicable qualifying life event.

What Information Is Needed for a Small Business Health Insurance Quote?

Employers generally need to provide information about the company and eligible employees before accurate plan options and premiums can be determined.

Common information includes:

• Business ZIP code
• Number of eligible employees
• Employee dates of birth or ages
• Employee home ZIP codes
• Dependent information when applicable
• Desired coverage effective date
• Current health insurance information, if applicable
• Preferred carrier, network or plan type

Additional business and employee documentation may be required when the employer formally applies for coverage.

What Should a Business Compare Before Choosing a Plan?

Small businesses should generally compare more than the monthly premium.

Important considerations can include:

• Employee premium costs
• Employer contribution amounts
• Dependent premiums
• Provider and hospital networks
• HMO and PPO availability
• Deductibles
• Copayments and coinsurance
• Prescription drug coverage
• Employee geographic locations
• Plan administration requirements

A lower-premium plan may not necessarily provide the provider network or cost-sharing structure that works best for a particular workforce.

Small Business Health Insurance Checklist

Before establishing group health insurance, a California small business can consider the following:

• Confirm the business qualifies for small-group coverage
• Identify all eligible employees
• Determine the employer's monthly contribution budget
• Review employee participation requirements
• Compare available insurance carriers
• Compare provider and hospital networks
• Review HMO and PPO options
• Compare premiums and employee cost-sharing
• Determine whether dependent coverage will be offered
• Review possible Small Business Health Care Tax Credit eligibility
• Select a desired coverage effective date

Frequently Asked Questions

What qualifies as a small business for health insurance in California?

California's small-group health insurance market generally includes employers with 1 to 100 employees. Additional eligibility requirements can apply depending on the carrier or program.

Can I get group health insurance with only one employee?

A qualifying business may be able to establish small-group coverage with one eligible employee. Covered California for Small Business, for example, requires at least one W-2 employee who is not the owner or the owner's spouse.

Does a California small business have to provide health insurance?

Employers 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. Other requirements can apply depending on the employer's circumstances.

How much does an employer have to pay toward employee health insurance?

The required contribution depends on the insurance arrangement. Covered California for Small Business generally requires employers to contribute at least 50% of the premium for the lowest-cost employee-only plan in the selected reference metal tier.

Can employees decline small business health insurance?

Generally, yes. Employees can usually waive employer-sponsored coverage. How a waiver affects participation requirements depends on the reason for the waiver and the applicable carrier or program rules.

Can small businesses offer both HMO and PPO plans?

Depending on the insurance carrier or program, employers may have the ability to offer multiple plan choices, potentially including both HMO and PPO options.

Can a business buy small-group insurance without Covered California?

Yes. Covered California for Small Business is one option, but qualifying employers may also obtain small-group coverage through insurance carriers and licensed agents or brokers outside the CCSB marketplace.

Can small businesses qualify for a health insurance tax credit?

Some qualifying small employers may be eligible for the federal Small Business Health Care Tax Credit. Specific requirements apply, and eligibility for small-group insurance by itself does not establish eligibility for the tax credit.

This article is for general educational and informational purposes and is not legal, tax or accounting advice. Small-group health insurance eligibility, employer contribution requirements, employee participation requirements, tax-credit eligibility, plan availability and insurance rules can vary by employer, carrier and program and may change over time. Employers should review current carrier, Covered California and applicable government guidance for requirements that apply to their business.