Why does the state of CA tax on individual HSA contributions?

There is nothing to fix, TurboTax is correct on how it handles this.

The issue is the confusing terminology that the IRS uses. To the IRS, the "employer contribution" for an HSA is the money that the employer reports with code W in box 12 on the W-2 and which the employer sends to the HSA.

The "employer contribution" is the sum of both what the employer contributes AND what you contribute by payroll deduction. That is, the "employer contribution" describes how the money is handled, not the source of the money.

This is highly confusing to taxpayers, but TurboTax and all state taxing agencies have to follow the same terminology.

So when California adds back the code W amount to state income, it is correct that it is adding back both the employer's contribution and your contributions by payroll deduction.