States had the flexibility to design and operate exchanges that best met their unique needs while complying with ACA’s statutory and regulatory standards. All the states had to make a choice regarding what kind of exchange they wanted. Basically, the states could:
• Build a fully state-based exchange;
• Default to a federal exchange (often referred to as a “federally facilitated exchange”); or
• Enter into a state partnership exchange with the federal government.
Each state had to establish an exchange where individuals can go to buy coverage, but the states also had to set up Small Business Health Options Programs (SHOPs or SHOP exchanges) where small businesses can purchase coverage.
California decided to create its own state-based exchange, called Covered California, instead of having the federal government run one.