State RegulationsCA specific✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
In California, a small employer with 25 or fewer employees may qualify for the federal small employer health insurance tax credit only if the employer:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
California's small business exchange, Covered California for Small Business (CCSB), serves employers with 50 or fewer employees. To claim the federal small employer health insurance tax credit, which applies to employers with 25 or fewer employees, the employer must purchase a qualified health plan through CCSB; buying coverage elsewhere does not make the employer eligible. This is a specific California exchange rule tested in the small-group and PPACA objectives.
Why the other options are wrong
- B) Coverage must be purchased through the CCSB exchange from a participating, licensed carrier; unlicensed out-of-state coverage does not qualify.
- C) The tax credit is tied to purchasing an insured QHP through the exchange, not to self-funding a plan.
- D) A stand-alone HSA is not health coverage and does not qualify for the small employer premium tax credit.
Memory hook
To get the small-business tax credit in California, you must buy through CCSB — the credit is attached to the exchange.