332 | 2025 Cal-Peculiarities ©2025 Seyfarth Shaw LLP www.seyfarth.com Insurance Code, and regulation by the California Department of Managed Healthcare. This means health plans that are fully or partially self-funded are not subject to (all or some of) the provisions in the new law. 8.3 Cal-COBRA The federal Consolidated Omnibus Budget Reconciliation Act (COBRA)38 generally requires employers of 20 or more employees who offer a group health care plan to offer the option of continuing health care coverage for up to 18 months if coverage is lost or reduced.39 Members of the employee’s family must also be given the opportunity to continue their coverage.40 California law operates with respect to employers too small to be covered by federal COBRA and with respect to periods following the federal COBRA period.41 Under Cal-COBRA, employers of 2-19 employees must offer 36 months (not just 18) of continuation coverage.42 Cal-COBRA provides an extension for those who have exhausted their 18 months on federal COBRA (or 29 months for disabled individuals) for a total extension that cannot exceed 36 months. 43 This special Cal-COBRA extension applies to insured plans where the employer’s master policy is issued in California. If the group master policy is not issued in California, then the employer must employ 51% or more of its employees in California and have its principal place of business in California. The legislation directly regulates only the health care service plan or insurer, and not employers as such. But presumably an employer will find it more expensive to purchase group coverage as the provider knows that it has a 36-month continuation coverage tail as well as mandatory conversion coverage obligations. In addition, many insurers require the employer to notify them of a Cal-COBRA qualifying event. California has a Health Insurance Premium Program (HIPP), by which the state will pay the insurance premiums of qualifying individuals under COBRA, Cal-COBRA, or OBRA (the extension of COBRA for up to 29 months for disabled individuals). California employers of 20 or more employees must give a HIPP notice to terminating employees.44 California employers must give a notice of rights to convert group medical coverage into individual coverage, within 15 days of the termination of group coverage.45 Termination doesn’t occur until the end of any continuation period (e.g. COBRA, extensions, OBRA).46 8.4 Mandatory Employer-Funded Health Care 8.4.1 Health care security and accountability laws Employers generally can decide whether to provide health care to employees (subject to penalties under the Patient Protection and Affordable Care Act for certain employers who do not provide a minimum level of health insurance coverage to full-time employees). In California it’s different, or at least it is in San Francisco. The San Francisco Health Care Security Ordinance requires employers engaging in business in the City of San Francisco that have on average at least 20 employees during a quarter to make “health care expenditures” for their employees who work in San Francisco or to make payments directly to the City.47 The health care expenditure rate for 2025 is $3.85 per hour payable (up from $3.51 per hour payable) for all employers with at least 100 workers and $2.56 per hour payable (up from $2.34 per hour payable) for businesses with 20-99 workers and nonprofits with 50-99 workers. For 2026, the health care expenditure rate will be $4.11 per hour payable for all employers with at least 100 workers and $2.74 per hour payable for businesses with 20-99 workers and nonprofits with 50-99 workers. Businesses with 19 or lessfewer workers and nonprofits with 49 or fewer workers are exempt. Beginning January 1, 2026, managerial, supervisory, and confidential employees who earn
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