Most Californians get their health plan benefits through an employer-sponsored group health plan.
California employers and employees can share costs and there are special tax incentives available to California businesses that provide group health benefits. There are 2 primary types of health benefit plans - Fully-Insured and Self-Funded and newer hybrid plans like Consumer Directed Health Plans (CDHPs) and Employer Driven Health Plans.
Fully-Insured Benefit Plans
The California employer pays a per-employee premium to an insurance company, and the insurance company assumes the risk of providing health coverage to the limits of the policy. Historically, small employers in California that offer health benefits are typically fully insured. About 90 percent of workers in firms with 3-199 employees are in fully insured plans. Overall, 45 percent of workers with health insurance in California are covered by a fully insured plan.
Self-Funded Benefit Plans
In a self-funded plan, the employer uses the money that it would have paid the California insurance company and instead directly pays health care claims to providers. Self-insured plans often contract with an insurance company in California for a stop-loss insurance policy to cover major medical expenses and a third party to administer the plan, but the employer bears most of the risk associated with offering health benefits. 90 percent of workers employed in California companies with 5,000 or more employees are in self-insured plans. Overall, 55 percent of workers with health insurance in California are covered by a self-insured plan.
Consumer-Directed Health Plan (CDHP)
A CDHP is a health benefit plan design in which California employees use spending accounts - Health Savings Accounts (HSAs) or Health Reimbursement Arrangements (HRAs) - to purchase routine health care services directly. Non-routine expenses are covered by traditional insurance after members meet a generally high deductible. Online health and financial tools are generally provided. With an HSA, California employees may contribute pre-tax dollars into the account; an employer contribution is optional, but employees have full control over all money in the account. With an HRA, only employers may fund the account and they decide whether money left in the account at the end of the year may roll over.
