As your business begins to grow, one of the smartest moves you can make is offering group health insurance. It’s a powerful way to attract great talent, boost morale, and stay ahead of California’s strict healthcare mandates. But if you’re new to group health plans, the landscape of California insurance plans, state regulations, and cost-sharing strategies can feel overwhelming.
This beginner-friendly guide breaks it all down. If you’re upgrading from individual plans or launching coverage for the first time, we’ll walk you through:
- What a group plan actually is
- Eligibility and legal obligations in California
- Common plan types and costs
- How to stay on top of California compliance
- Tools like benefits benchmarking
What Is a Group Health Plan?
At its core, a group health plan is a health insurance policy offered by an employer to a group of employees and sometimes their dependents. Unlike individual insurance, these plans offer:
- Lower monthly premiums per person
- Streamlined enrollment
- Broader coverage options
- Employer tax advantages
To qualify, your company must typically have at least one full-time W-2 employee other than the owner or their spouse.
Key Elements of Group Health Plans in California
| Component | What It Means |
| Plan Type | PPO, HMO, EPO, or HDHP options |
| Employer Contribution | Must contribute at least 50% of the employee’s monthly premium |
| Minimum Participation | Most insurers require 70% of eligible employees to enroll |
| Compliance | Plans must meet ACA and California compliance standards (e.g., MEC, affordability) |
For full details on small business eligibility, check out Covered California for Small Business.
Why Offer a Group Plan?
Even if you’ve previously encouraged employees to get their own individual coverage, there are several reasons to transition to a group plan:
- Lower premiums due to risk pooling
- More comprehensive networks and benefits
- Tax benefits for employers (deductible premiums and potential credits)
- Improved recruitment and retention
Under California law, employers with 5+ employees must also meet CA employee coverage requirements. Offering a group health plan ensures you meet both federal and California insurance plans standards.
Common Group Plan Types
| Plan Type | How It Works |
| PPO (Preferred Provider Organization) | Offers flexibility to see out-of-network doctors at higher costs |
| HMO (Health Maintenance Organization) | Lower premiums but requires referrals and network providers |
| HDHP (High-Deductible Health Plan) | Paired with HSA; lower premiums, higher deductibles |
| EPO (Exclusive Provider Organization) | In-network only, but no referral requirement |
Most California insurance plans offered to small businesses fall into one of these categories. Choosing the right type depends on your team’s healthcare needs and how much cost-sharing they can handle.
Understanding California Compliance
Staying compliant with California and federal law means more than just choosing a plan. Here are a few legal responsibilities to keep in mind:
Minimum Essential Coverage (MEC)
All plans must meet MEC standards under the ACA. This means covering essential health benefits like preventive care, hospitalization, and maternity.
Affordability Standards
For 2024, a plan is “affordable” if the employee’s premium for the lowest-cost self-only plan does not exceed 8.39% of household income. California enforces this rule more strictly than some states. See IRS affordability rules for more.
Required Filings
If you’re an Applicable Large Employer (ALE) (50+ full-time equivalents), you must submit Forms 1094-C and 1095-C each year to the IRS.
The Role of Benefits Benchmarking
Not sure how your offerings stack up? Benefits benchmarking helps you compare your plan’s structure, costs, and perks to what other businesses are offering.
Here’s what to look at:
- Employer contribution percentages
- Plan types offered
- Use of HSAs, FSAs, or wellness stipends
- Network access and mental health services
Sample Benchmarking Snapshot (CA Small Employers)
| Company Size | Average Employer Contribution | Common Plan Type | Popular Add-Ons |
| 2–10 Employees | 70–75% | PPO | Vision, Telehealth |
| 11–25 Employees | 75–85% | HMO + HDHP Combo | HSA match, gym reimbursements |
| 26–50 Employees | 85–90% | PPO + FSA/HSA | EAPs, dental & mental health |
For benchmarking help, visit SHRM’s benefits tools or connect with a trusted broker.
Working With an Insurance Broker
This is where having an experienced insurance broker really matters. Brokers:
- Offer unbiased plan comparisons across carriers
- Help you stay on top of California compliance
- Guide transitions from individual to group plans
- Simplify employee education and open enrollment
- Act as year-round advocates for claims and renewal support
Choosing the wrong plan or missing a compliance detail can cost your business more than you think. A broker keeps you protected and proactive.
Take the First Step with Confidence
Choosing your first group health plan is a big decision—but it doesn’t have to be complicated. With the right support and resources, you can build a benefits package that aligns with both your budget and your business goals. And as you grow, tools like benchmarking, compliance monitoring, and broker partnerships will ensure you continue to offer value-driven California insurance plans.
At Regency West Insurance, we help California employers design and manage smart, scalable CA employee coverage strategies. Whether you’re just starting out or transitioning from individual coverage, we’ll walk you through every step—from compliance to carrier selection—with clarity and care.
Schedule a strategy session with Regency West Insurance
Frequently Asked Questions
1. How do I know if my business qualifies to offer a group health plan in California?
To qualify for a group health plan in California, your business must have at least one full-time W-2 employee (not including the business owner or their spouse). The plan must also meet state and federal Minimum Essential Coverage (MEC) requirements and include an employer contribution of at least 50% of the premium for employee-only coverage. You’ll also need to meet minimum participation rates, typically around 70% of eligible employees.
2. How do California insurance plans differ from individual plans?
California insurance plans offered through group health are often more affordable, come with better network access, and include employer contributions that help reduce the employee’s out-of-pocket costs. Unlike individual plans, group plans also offer tax advantages to employers and help businesses comply with CA employee coverage mandates and ACA reporting requirements.
3. What are my legal responsibilities once I offer a group health plan?
Once you offer group health insurance in California, you must:
- Provide Minimum Essential Coverage that meets ACA standards
- Ensure the plan is “affordable” under IRS rules (not exceeding 8.39% of employee income for self-only coverage in 2024)
- Maintain accurate records for potential audits or IRS reporting (Forms 1094-C and 1095-C, if you’re an Applicable Large Employer)
- Continue offering open enrollment periods annually
4. How do I choose between PPO, HMO, and HDHP plans?
Choosing the right plan depends on your team’s healthcare needs and budget. Here’s a quick guide:
- PPO: More flexibility, higher premiums, wider provider access
- HMO: Lower premiums, limited to in-network providers, referral required
- HDHP + HSA: Lower premiums, higher deductibles, offers tax-advantaged savings
An experienced insurance broker can help you compare plans and understand what’s best for your company size and industry.
5. What is the minimum employer contribution for group plans in California?
In most cases, California requires employers to contribute at least 50% of the monthly premium for employee-only coverage. Some insurers may require a higher percentage or set their own guidelines. Contributions toward dependent coverage are typically optional but can be a valuable enhancement to your overall California insurance plans strategy.
6. How do I choose the right group health plan for my team?
Choosing the right group health plan depends on:
- Your team’s size and medical needs
- Budget for employer contributions
- Preferred plan type (PPO, HMO, HDHP)
- Optional add-ons like dental, vision, or HSAs
Tools like benefits benchmarking can help you evaluate how your offering compares to similar businesses. Working with a licensed insurance broker is the best way to explore options, ensure compliance, and make informed decisions.