As it turns out, the fact that your employer included the HSA contributions in box 16 doesn't make any difference.
While this number appears on page 1 of form 540 on line 12, in fact, it is never used anywhere on the return.
The CA return starts with federal adjusted gross income (which includes the HSA exclusion), so CA has to back out the exclusion by adding the code W amount (from box 12 on the W-2) to line 1 of form CA(540), so that it can be an addition to CA income on line 16, form 540.
No further adjustment is necessary.
[Edited 4/3/2019 8:53 am CDT]
