California Healthcare Insurance: What you need to know

There is currently no state law requiring employers to offer group healthcare insurance to their employees, but most employers do provide this benefit. If an employer provides health insurance, California's insurance laws require policies to cover certain benefits (mandated benefits) and give employees the right to continue group coverage in certain circumstances if the employee leaves the group. Additional information about continuation requirements is available.
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Under the federal Employee Retirement Income Security Act (ERISA), the federal law supersedes most state laws that affect employee benefits plans. There is a large exception for state insurance laws. Thus, while state laws that regulate insurance must be followed, laws that impact self-insured benefit plans are nullified by ERISA. Thus, California's mandated benefits, continuation, and conversion provisions do not apply to health plans in which the employer pays all benefits without the proceeds of any insurance policy. An employer's health plan is self-insured if the risk of paying claims is on the employer and not on an insurance company. Self-insured plans may contract with third-party administrators (TPAs), including insurance companies, to process benefit claims. The TPA pays the claims and is reimbursed by the employer. Many self-insured plans also buy “stop-loss” insurance to cover very large claims. The purchase of stop-loss insurance does not result in the loss of self-insured status and the exemption from state insurance law regulation.
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