Running a small business (or any business) in California isn’t always a walk in the park. There are regulations to follow, forms to file, community licenses to snag, and more. If your business has 50 or more employees, there might be some extra hoops to jump through.

ACA Employer Mandate

One of those added hoops applies to group health insurance. The Affordable Care Act (ACA) requires businesses with 50 or more full-time and/or full-time equivalent (FTE) employees to offer health insurance. This is known as the Employer Mandate. An employee is considered full-time when working 30 hours or more weekly.

Health insurance must be offered to 95% of eligible employees and their children (up to age 26). If your business is subject to the mandate and you don’t offer affordable coverage with minimum value, you are subject to penalties. For more about Applicable Large Employers (ALEs), visit the IRS website.

ACA-compliant health plans provide essential health benefits to your employees. There is no medical underwriting for groups in California of up to 100 employees. You can plan your budget knowing rates are locked in for 12 months.

California Individual Mandate

If your business is not subject to the ACA employer mandate, you might want to consider offering health insurance to your workers anyway. Employee benefits can help you differentiate your business from other employers. They enable you to compete more effectively with larger businesses that are subject to the federal employer mandate. Employees these days expect benefits. You’re at a disadvantage when it comes to attracting and keeping employees if you don’t offer them. Among the most-desired benefits is health insurance, which repeatedly ranks highly on employee surveys.

Another reason to offer health insurance is to help your employees satisfy the individual mandate in California. In 2020, California became one of five states (plus the District of Columbia) to implement an individual requirement for health coverage. Californians must either have qualifying health insurance or pay a penalty when filing their state income taxes. For tax year 2023 (paid in 2024), the penalty is $900 per adult and $450 for dependent children under 18. A family of four without insurance for a full year faces a penalty of $2,700.

As a small business employer with fewer than 50 employees, you’re not required to offer health insurance. However, there are business reasons to consider it:

• goodwill toward employees/increased worker morale;
• tax deductibility of health insurance benefits;
• aids in the recruitment of new employees;
• increases retention of existing employees/minimizes turnover;
• keeps your workforce healthy;
• increased productivity.

While there’s a price tag attached to health insurance, it can be balanced out by taking these other factors into account.

Evaluate Your Choices and Sources

If you’re thinking of providing health insurance to your employees, there are several options available to you:

• Purchase it directly through an insurance company.
• Buy it with the assistance of a licensed insurance broker.
• Through the public health insurance exchange, Covered California for Small Businesses.
• Through the CaliforniaChoice small business exchange.

Coverage options vary, but the price should be comparable to similarly designed plans. It doesn’t matter whether you’re buying it directly or through a broker. In fact, using a broker could save you money. That’s because your local broker will know the details about the plans available in your area. A broker will also know the provider networks. This may be especially important to you or your employees if you’re currently seeing a doctor for specialized care.

Your broker can also help you narrow your choices if you’re not sure if you want to offer HMO, PPO, or other coverage. A big advantage to getting coverage through the CaliforniaChoice exchange is you can set your contribution limit for coverage. Your employees can then apply your contribution to the cost of the plan they like best. If a plan costs more than you’re contributing, your employees pay the difference.

Another advantage of CaliforniaChoice is the availability of coverage from eight different health plans. You and your employees can choose from dozens of HMO, PPO, EPO, and Health Savings Account-qualified plans. That means you can find a plan that fits your health care needs and budget.

Talk With a Broker for More Information

Small businesses have minimal health insurance requirements to fulfill.cYou don’t have to offer it if you have fewer than 50 FTEs. However, there are other reasons you might want to consider it. To find out more about Covered California for Small Business, CaliforniaChoice, and other available options, talk with your employee benefits broker. Your broker can provide a custom quote for your business. There’s no obligation. If you don’t have a broker, we make it easy to search for one here.