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Understanding California Senate Bill (SB) 1375: New state law changes the definition of small employer and employee

March 2019

California Senate Bill (SB) 1375 stops Californians from purchasing health plans that offer fewer benefits and protections than those that comply with the Affordable Care Act (ACA or also known as Obamacare).

This new state law changes the definition of “eligibility” for small employer health plans and employees and prevents small businesses and self-employed individuals with no employees from enrolling in a group health plan. The law prohibits employer group plans from being issued, marketed, or sold to a sole proprietorship or partnership (and their spouses), without eligible “common law” employees.  What is more important is these are prohibited through any arrangements including an offering through an association.

Therefore, the newly signed legislation will prohibit the formation of new “association health plans” in California. Certain association health plans did receive exemptions from the new law.

It also means that only individual health plans can be sold to any entity without employees, and individuals must purchase health coverage in the individual market if they wish to obtain health insurance.