California last week became the first state to pass legislation creating a health insurance exchange as mandated under the new federal health reform law. Some states, like New York, have only begun to pay lip service toward implementing health reform, while others, like Missouri, are still fighting the federal law's legality.

But the legislation is nonetheless expected to serve as a model if it is signed into law as expected.

The exchanges will be state-based. The new law gives states until 2014 to set up their exchanges. That's when businesses will have the option of purchasing insurance through the exchange or sending their employees onto the exchange to purchase insurance on their own. Many of those details, though, have yet to be worked out.

Other states, including both New York and Utah, already have exchanges that pre-dated federal health reform. The exchange for businesses in New York City called HealthPass and the Utah exchange offer separate yet similar models that allow businesses to contribute a set dollar amount toward health insurance. Employees can then use the money to purchase the insurance they like best, paying more out of their own pockets if need be.

Whether these models will continue to operate is unclear. To do so, state legislators would have to authorize these exchanges to continue to operate as the official state-wide exchange.

The legislation in California actually consists of two separate bills. One would provide information about insurance plans for consumers, another defines how the exchange will operate with a board that will pick which health insurance plans to make publicly available for purchase online. It would also link residents with subsidies they may be eligible for.

Unfortunately for small business, who will be the first to partake in the exchanges (large businesses with more than 100 full-time employees won't be eligible until 2017), neither piece of legislation spells out much beyond that, suggesting that states may move to codify exchanges in state law but that it will be years before the public gets a more detailed understanding of how they will interact with the exchanges.

That's to be expected. The Department of Health and Human Services has not finished issuing its guidelines on the many facets of the new federal health law, having only outlined how they believe the Web portals should operate.