Hobby Lobby's challenge to the ACA's contraception requirement carries huge stakes, but mostly because they aren't bounded by Obamacare itself. Its threat to the ACA's actual program architecture is pretty small.

By contrast, while the Supreme Court was hearing oral arguments in that case Tuesday, the D.C. Circuit Court of Appeals was simultaneously hearing oral arguments in a case that is bounded by Obamacare, but threatens to shatter it.

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The case is Halbig v. Sebelius. I wrote about it here, most recently when a federal judge did the right thing and essentially called the challenge horseshit. It is based on an opportunistic reading of sloppy text in the statute, and perpetuated by professional liars who claim that Congress possibly wanted to withhold insurance subsidies from people in states that did not build their own exchanges, knowing that what they're saying is false.

My strong hunch remains that the challenge will ultimately fail, both because it is a total fabrication, and because the courts are supposed to administer a test in cases like these, and the ACA passes it.

But judges actually can just do whatever they want, and two of the judges on the Circuit Court's three-judge panel (both GOP appointees) seem like they're leaning toward YOLOing a big blow to the law. So it's worth taking a look at where things go from here, and what would happen if the Supreme Court were to ultimately eliminate subsidies in the 36 Healthcare.gov states. The damage to the law would be severe, but the politics would actually be pretty fascinating.

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“There is an absurdity principle, but not a stupidity principle," said Judge Raymond Randolph. "If the legislation is just stupid, it’s not up to the court to save it.”

Judge Thomas Griffith was more subdued. He more or less acknowledged that lawmakers intended to provide subsidies to eligible individuals in every state, but then said too bad, so sad, the bad drafting isn't his problem.

"If we know the clear purpose of Congress and yet they don't legislate clearly enough to achieve that purpose," he asked. "Is it our job to fix the problem?"

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Well, actually, yeah. He and his fellow panelists are supposed to apply a two-part test known as the Chevron test. First, they must examine the text of the statute to determine whether there’s any ambiguity to it. If there’s no ambiguity, then the government must do what the law clearly states. If the text is ambiguous, though, judges must determine whether the administration's interpretation is plausible.

I would argue that the statute read in toto is perfectly clear, drafting sloppiness notwithstanding. It's obvious that the law intends to make subsidies available everywhere. Sloppiness does not equal ambiguity of purpose, and that's basically what the district court judge found.

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But it's not outrageous to argue that the text is ambiguous. And if the court determines that it's ambiguous, challengers lose anyhow, because judges aren't then supposed to do whatever they want. Rather, they're supposed to make sure that the administration isn't just making things up. And there's no way to argue that the Obama administration's interpretation isn't plausible.

The only way challengers win is if judges ignore context and rule that the law clearly contemplates leaving people in states with federally facilitated exchanges high and dry. To buy into the lie.

I don't think it'll happen. If Griffith and Randolph go this route, then the administration can ask the full circuit (including its four new Obama appointees) to weigh in, and if that fails, it'll probably go to the Supreme Court, and it's hard to imagine the same court that undertook such acrobatics to affirm the constitutionality of the law would turn around and explode it.

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But let's pretend they did.

Just like that, millions of people in Healthcare.gov states -- disproportionately conservative states -- would lose their insurance subsidies. They'd still be required to purchase insurance, but they'd no longer be able to afford it. It would be a catastrophe of such enormous proportion that lawmakers in states and the federal government would have to do something.

I don't think this would go quite as well for the GOP as the law's challengers imagine. Republicans would insist on repealing the individual mandate, so that their constituents wouldn't be on the hook for unaffordable insurance. Democrats would insist on cleaning up the sloppy language, so that the subsidies would begin to flow again.

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Who knows how long that standoff would last, but every day it went unresolved would increase pressure on the governors of Healthcare.gov states to begin building their own exchanges. I imagine some of them would start right away. Others would not, but they wouldn't be able to get away with doing nothing. They'd have to lobby their congressional delegates to fix the problem without punishing their constituents -- i.e., by turning the subsidies back on.

In other words I think the politics of that fight would actually favor Democrats. But that doesn't mean Democrats would win. And if the issue went unresolved for a long time, or the administration provided targeted tax penalty relief to Healthcare.gov states, America would become a country with a two-tiered healthcare system. A country divided between liberal Obamacare states, with small uninsured populations and greater economic mobility, and conservative states where politicians punished their poor and middle class out of partisan spite.