How Much Does Small Business Health Insurance Cost in California?

The cost of small business health insurance in California can vary significantly from one employer to another. There is no single monthly premium that applies to every business because group health insurance rates depend on the employees being covered, where they live, the health plans selected and other rating factors.

Quick answer: Small business health insurance costs in California depend on factors such as employee and dependent ages, geographic location, insurance carrier and health plan selection. The amount the business actually pays also depends on how much of the premium the employer chooses or is required to contribute.

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

How Much Does Small Business Health Insurance Cost in California?

There is no single statewide price for small business health insurance.

Two California businesses with the same number of employees can receive different total premiums because their employees may be different ages, live in different rating regions or select different health plans.

The employer's cost can also be very different from the total insurance premium because employees commonly pay a portion of their premiums through payroll deductions.

For a broader explanation of small-group coverage, see Small Business Health Insurance in California: Eligibility, Costs and Requirements.

What Determines Small Business Health Insurance Premiums?

Factors that can affect the cost of California small-group health insurance include:

• Employee and dependent ages
• Geographic rating area
• Insurance carrier
• Health plan selected
• Metal tier
• Provider network and plan type
• Number of employees and dependents enrolling

Covered California for Small Business also identifies factors such as business size and location, employee ages and selected health plans when explaining what can affect an employer's insurance costs.

Does Employee Age Affect Group Health Insurance Rates?

Yes. Age is one of the factors that can affect premiums in California's small-group health insurance market.

As a result, a business with an older workforce may have different premiums from a business with younger employees even if the two companies have a similar number of workers.

Dependent ages can also affect the total premium when family members enroll.

Does Business or Employee Location Affect the Cost?

Yes. California is divided into geographic rating regions for health insurance purposes, and premiums can vary by region.

Plan and carrier availability can also differ depending on location.

This means an employer with employees in Los Angeles County may see different plan availability and rates from an employer or workforce located in another part of California.

Businesses with employees spread across multiple areas should also pay attention to whether a carrier's provider network adequately serves the locations where employees live.

Does an Employee's Health Affect the Premium?

In California's ACA-compliant small-group market, premiums are not individually based on an employee's medical history or health condition.

An employee generally is not charged a higher small-group premium simply because they have a medical condition or have used significant medical services.

This differs from certain types of insurance where individual health underwriting may affect eligibility or price.

Does the Metal Tier Affect the Cost?

Yes. Small-group plans may be available in Bronze, Silver, Gold and Platinum coverage levels.

In general, the tiers work as follows:

• Bronze: Lower monthly premiums are common, with employees generally paying more when they receive care
• Silver: A middle range of premiums and member cost-sharing
• Gold: Higher monthly premiums are common, with lower member cost-sharing
• Platinum: Generally higher monthly premiums and lower costs when employees receive covered care

The metal tier describes how costs are shared between the health plan and members across a standard population. It does not measure the quality of the doctors or hospitals in the plan.

Do HMO and PPO Plans Cost the Same?

Not necessarily.

Plan type and provider network can affect premiums.

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

PPO plans generally provide greater flexibility to receive covered care from both in-network and out-of-network providers, although members typically pay more when using out-of-network care.

The actual premium difference between an HMO and PPO depends on the plans and carriers available to the group.

What Is the Difference Between the Total Premium and the Employer's Cost?

The total premium is the full monthly price charged for the health insurance coverage.

The employer's cost is the portion of that premium paid by the business.

The employee may pay the remaining portion through payroll deductions.

For example, suppose an employee's health insurance premium is $700 per month and the employer contributes $400.

The cost could be divided as follows:

• Total monthly premium: $700
• Employer contribution: $400
• Employee contribution: $300

In this example, the insurance still costs $700 per month, but the employer's direct premium contribution is $400 per month for that employee.

This is only an example to illustrate how premium sharing works and is not an estimate of actual California insurance rates.

How Much Does an Employer Have to Contribute?

Employer contribution requirements depend on the insurance carrier or program being used.

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.

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

The employer's contribution strategy can have a significant effect on both the business's benefits budget and the amount employees pay for coverage.

Can an Employer Pay 100% of Employee Health Insurance?

Yes. An employer can generally choose to pay the entire employee premium if permitted under the applicable insurance arrangement.

Some businesses choose to contribute 100% toward employee-only coverage, while others split the premium with employees.

An employer may also use a contribution strategy in which it pays a defined amount toward a reference plan and employees who choose more expensive plans pay the additional premium.

Does an Employer Have to Pay for Dependents?

Employer contributions toward dependent coverage can differ from contributions toward employee-only coverage.

A business may choose to contribute toward premiums for spouses and children, while another business may contribute only toward employee coverage and require employees to pay the additional dependent premium.

Applicable carrier, program and employer-mandate requirements should be reviewed when establishing the contribution structure.

How Does a Defined Employer Contribution Work?

Rather than paying the same percentage of every available plan, an employer may be able to establish its contribution using a reference plan or other permitted contribution method.

This can help the employer create a more predictable benefits budget while still allowing employees to choose among available health plans.

For example, an employer might establish its contribution based on a particular plan. An employee selecting that plan would pay the remaining employee share, while an employee selecting a more expensive option could be responsible for the additional premium.

The exact contribution methods available depend on the carrier or program.

Can Employees Choose Different Plans?

Depending on the insurance arrangement, employees may be able to choose from multiple health plans.

Covered California for Small Business, for example, allows participating employers to offer plan choices across available coverage levels subject to program rules.

Giving employees multiple choices can allow one employee to select a lower-premium plan while another selects a plan with a different provider network or lower cost-sharing.

The employee's plan selection can therefore affect the employee's own premium contribution.

Does the Number of Employees Affect the Total Cost?

Yes, because adding employees and dependents generally adds additional premiums to the group's total monthly bill.

However, the cost is not simply determined by multiplying one flat rate by the number of employees.

Each enrolled employee and dependent can contribute differently to the total premium based on applicable rating factors and the coverage selected.

What Happens to Costs When Employees Add Dependents?

Adding a spouse or children generally increases the total monthly premium associated with that employee's coverage.

How much of that additional cost is paid by the employer depends on the employer's contribution policy.

Before selecting a contribution strategy, employers may want to compare costs for:

• Employee-only coverage
• Employee plus spouse coverage
• Employee plus child or children coverage
• Family coverage

This can provide a clearer picture of what employees with different family situations may pay.

What Other Costs Should Employers Consider?

Premiums are the most visible cost of group health insurance, but employers should also consider the administrative responsibilities involved in maintaining coverage.

These can include:

• Managing new-hire enrollments
• Processing employee terminations
• Handling qualifying life events
• Maintaining employee eligibility records
• Managing annual open enrollment
• Updating payroll deductions
• Handling applicable continuation-coverage responsibilities

For many employers, evaluating group health insurance therefore involves both the premium budget and ongoing benefits administration.

Can Small Businesses Receive a Health Insurance Tax Credit?

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

The maximum credit can be worth up to 50% of qualifying premiums paid by an eligible small business and up to 35% for an eligible tax-exempt employer.

The credit is generally available for no more than two consecutive taxable years.

Eligibility is narrower than ordinary small-group health insurance eligibility and includes requirements involving the number of employees, average employee wages, employer premium contributions and qualifying coverage.

Employers should not assume that purchasing small-group insurance automatically makes them eligible for the tax credit.

Because this is a federal tax credit, businesses should consult an appropriate tax professional regarding eligibility and calculation.

Is the Cheapest Health Plan Always the Best Choice?

Not necessarily.

A lower monthly premium can reduce immediate costs, but employers and employees should also consider how the plan works when health care is actually used.

Important factors include:

• Deductibles
• Copayments
• Coinsurance
• Provider networks
• Hospital availability
• Prescription drug coverage
• Out-of-pocket limits

A plan with a higher monthly premium may provide lower cost-sharing when employees receive care, while a lower-premium plan may require employees to pay more when using covered services.

Why Are Provider Networks Important When Comparing Cost?

Premium alone does not show whether an employee's preferred doctors and hospitals participate in a plan.

A less expensive plan may use a narrower provider network, while another plan may offer access to a different group of physicians and hospitals.

Employers comparing plans may want to consider the health systems and provider networks that are important to their workforce in addition to monthly premiums.

Can Group Health Insurance Rates Change Every Year?

Yes. Health insurance premiums can change when coverage renews.

Changes can result from updated carrier rates, employee and dependent ages, enrollment changes, plan selections and other applicable rating factors.

Plan availability and provider networks can also change from one year to the next.

Employers should review renewal information rather than assuming the next year's coverage and costs will remain the same.

How Can a Business Control Health Insurance Costs?

Employers may have several ways to manage their group health insurance budget depending on the plans and programs available.

Strategies can include:

• Establishing a defined employer contribution
• Comparing multiple carriers
• Reviewing different metal tiers
• Comparing HMO and PPO options
• Offering employees multiple plan choices when available
• Reviewing provider networks
• Reevaluating coverage at renewal
• Checking potential Small Business Health Care Tax Credit eligibility

The lowest premium is not always the lowest overall cost for employees, so both premiums and plan benefits should be considered.

How Do You Get an Accurate Small Business Health Insurance Quote?

Because rates depend on the actual group, the most reliable way to determine cost is to prepare a quote using the employer's current employee information.

Information commonly needed can include:

• Business ZIP code
• Employee dates of birth or ages
• Employee home ZIP codes
• Dependent information
• Desired effective date
• Current coverage information, if applicable
• Preferred plan types or provider networks

A group quote can then show the available plans and actual premiums for that employer's workforce.

Small Business Health Insurance Cost Checklist

When comparing the cost of group health insurance, employers can review:

• Total monthly group premium
• Employer contribution per employee
• Employee payroll contribution
• Dependent premiums
• Employer contribution toward dependents
• Plan deductibles
• Copayments and coinsurance
• Out-of-pocket limits
• Provider and hospital networks
• Prescription drug benefits
• Potential tax-credit eligibility

Frequently Asked Questions

How much is small business health insurance in California?

There is no single California small-business health insurance price. Premiums depend on factors including employee and dependent ages, location, carrier and plan selection. An actual group quote is needed to determine the available rates for a particular business.

Does an employer pay the entire health insurance premium?

Not necessarily. Employers commonly contribute toward employee premiums while employees pay the remaining amount. Employers can choose to contribute more, including potentially paying the entire employee premium, subject to the applicable insurance arrangement.

Does employee age affect small business health insurance premiums?

Yes. Age is one of the permitted factors that can affect premiums in California's small-group health insurance market.

Can an employee's medical condition increase the small-group premium?

ACA-compliant small-group premiums are not individually based on an employee's health status or medical history.

Are PPO plans always more expensive than HMO plans?

No universal price relationship applies to every plan. PPO plans often provide greater provider flexibility, but actual premiums depend on the specific carrier, network and plan being compared.

Does adding a spouse or children increase the premium?

Generally, yes. Enrolling eligible dependents adds to the total premium. How much of the dependent premium the employee pays depends on the employer's contribution policy.

Can small businesses get a tax credit for providing health insurance?

Some qualifying small employers may be eligible for the federal Small Business Health Care Tax Credit. The maximum credit can reach 50% of qualifying employer premium contributions for eligible small businesses and 35% for eligible tax-exempt employers, subject to specific requirements.

Can small business health insurance premiums change at renewal?

Yes. Premiums can change from year to year based on updated rates and applicable rating factors. Plan availability, benefits and provider networks can also change.

This article is for general educational and informational purposes and is not legal, tax or accounting advice. Health insurance premiums, employer contributions, plan availability and tax-credit eligibility vary based on the employer, employees, carrier, location and coverage selected and may change over time. Businesses should obtain current group-specific rates and consult an appropriate tax professional regarding tax-credit eligibility.