"Based on my knowledge, this imputed income wouldn't be taxable in California as it's related to the medical insurance to a spouse and child."

What is your basis for taking that position?  Rule of thumb is that all income is taxable unless specifically excluded by the tax law.  Unless you are able to cite the code and Regs for exclusion or exemption, subject to CA conformity, the presumption is that the amount is taxable.

If not HSA, it is looking like it could be either an FSA or HRA which, for CA tax purposes, is treated similarly as HSA.  Since FSA is a salary reduction plan and should be shown as such on the payslips, the term "Med Imp Inc" wouldn't fit the bill.  If Med Imp Inc shows up on the payslip only as a memo entry and doesn't make it to the W-2, I wonder then how FTB was able to pick that up as state adjustment?

I wouldn't venture to guess what the line item may be but ask the client to clarify (and probably provide a copy of the plan policy for review).  Or if it is just a trivial amount, it may not even be worth the time and the client may simply agree to settle the incremental tax.