Every lawyer who reads Hot Air will start shouting at their screen when they read that headline that you can’t tell how a judge is leaning by what he says at oral argument. Maybe Kennedy’s actually pro-challenger in this case and just wants to iron out one wrinkle in their argument before voting with them! Could be, but don’t forget that the last time O-Care was before the Supreme Court, Kennedy sounded verrrry skeptical of the individual mandate in oral argument, going so far at one point as to ask whether it wouldn’t make more sense to nuke the entire statute rather than try to salvage parts of it if the mandate was held unconstitutional. And in the end, that’s exactly how he voted — the mandate is unconstitutional and the entirety of ObamaCare deserves to be flushed. Kennedy’s oral-argument tea leaves in that case were spot on. Worth noting.

As hopefully all grassroots conservatives know by now, the issue in the Halbig case (now known as King v. Burwell) is what the ObamaCare statute means when it says that federal subsidies for premiums are available to anyone who buys their insurance on an exchange “established by the State.” More than 30 states chose not to build their own exchanges so the federal government built an exchange of its own for residents of those states, a.k.a. Healthcare.gov. The question: Are subsidies available for consumers who buy their plans from that federal exchange or are they only available to people who buy from an individual state’s exchange? If it’s the latter, millions of people will suddenly lose their premiums, making their plans unaffordable; as customers drop out, insurers will lose the revenue they need to pay for sick customers’ treatment and the entire ObamaCare scheme could collapse.

So which way is Anthony Kennedy, eternal swing voter, leaning? Hmmmmm:

On several occasions, Justice Anthony Kennedy, who is seen as a swing vote, said that if those challenging the Obama administration get their way, it would raise “a serious constitutional question” about the federal government’s power to coerce states… The plaintiffs in the case, represented by Michael Carvin, have argued that the authors of Obamacare intended to withhold subsidies from those states that didn’t set up their own exchanges as an incentive for them to do so. But that interpretation, Kennedy said, would raise questions relating to the sovereignty of states. Solicitor General Donald Verrilli Jr., speaking on behalf of the Obama administration, seized on this point, arguing, “Our reading is the pro-federalism ruling.”

That was a smart thing for Verrilli to say, although it may be the first time in six years that the Obama White House has ever pretended to be pro-federalism. There’s a line of landmark Supreme Court precedents in the 1990s, all supported by Kennedy, that holds that federalism is integral to the U.S. Constitution and therefore the federal government can’t force the states to carry out its legislative agenda. States are sovereign, except to the extent the Constitution itself limits that sovereignty. The federal government can’t coerce them to do its bidding. Without having read a transcript, it sounds from various reports this morning like Kennedy’s worried that if he sides with the challengers, he’d be deciding that the feds can coerce the states. If he finds that subsidies are only available to states that build their own exchanges, not to customers who buy insurance on the federal exchange, then he’s blessing a scheme in which the feds are applying heavy fiscal pressure to the states to conform their own health insurance systems to the federal design. It’s coercion! (Kennedy’s phrasing: “Either you create your own exchange, or send your insurance market into a death spiral.”) Whereas if Kennedy sides with the White House interpretation, that the states can do whatever they want and that consumers can just use the federal exchange as a backstop if need be, the coercion problem is solved. See the gigantic irony in that? ObamaCare, the biggest federal intervention in health care since Medicare, may survive legally on federalism grounds because the feds decided to go really big and build their own exchange. Good lord.

If Kennedy’s leaning this way he has three options, says SCOTUSblog:

Kennedy’s concern is about the federal/state balance and his distrust of a reading that puts a gun to the head of states that fail to set up their own exchanges – threatening them with the almost certain destruction of their statewide insurance systems if they do not comply. That concern might be interpreted (as a matter of legal theory) in a few different ways: Justice Kennedy might believe that Congress would not have intended to set up such a dubious system; he might believe that this reading is required but actually unconstitutional (so that he would strike down the statute’s condition that subsidies apply only to exchanges established by the state); or – perhaps most likely – he might believe that the statute should be interpreted so as to avoid the “serious constitutional problem” he identified.

He could simply side with the White House’s reading of “established by a State” and rule that “State” includes “federal government” for purposes of subsidies. Or he could decide that, whatever was meant by “established by a State,” he has no choice but to side with the White House according to the Court’s own rules of interpretation. One of those rules, trumpeted lately by lefties and mentioned today by Kennedy, is “constitutional avoidance,” which says that if a phrase in a statute is unclear and you’re trying to decide how to read it, a judge should read it in a way that doesn’t implicate constitutional principles. (Constitutional rulings have major consequences are are all but impossible for Congress to undo so the Court tries to avoid them whenever possible, at least in theory.) A similar rule also mentioned today by Kennedy during oral arguments is the “Chevron rule,” which says that when a statutory phrase is unclear, a judge should lean towards the interpretation of the federal agency that’s enforcing the statute, in this case the IRS. Here, “constitutional avoidance” and the Chevron rule point the same way, towards the White House’s interpretation of “established by a State.” If you believe, a la Kennedy, that the challengers’ reading of that phrase would violate federalist principles under the Constitution, you should prefer the feds’ reading. If you believe that the IRS’s decision to extend subsidies to customers on the federal exchange deserves some deference, you should also prefer the feds’ reading.

The third option open to Kennedy is the trickiest. What if he decides that “established by a State” isn’t unclear, that the plaintiffs are obviously right that “State” means the states only, not the federal government — but that, per the federalism/coercion reasoning of those 1990s cases, that means the statute is … unconstitutional? What happens to the statute then? Is the entire subsidies scheme, not just for federal customers but for state customers, now illegal? That would be an even bigger disaster for the White House than they’re expecting. Or, as SCOTUSblog suggests, would Kennedy decide that because the state subsidy scheme is unconstitutional, the only solution is to remove the element of coercion by letting subsides flow to customers on the federal exchange too, which would be a total win for the White House? If Kennedy goes the latter route, he’d essentially be curing a constitutional defect by rewriting the statute himself to make it conform to the White House’s expectations. How’s that for drama?

Just to confuse this a tiny bit more, Kennedy also said this today:

“But Kennedy added that the challengers may win anyway based on the plain meaning of the provision at issue.” http://t.co/3TUO6uXDiK — Mark Hemingway (@Heminator) March 4, 2015

So, who knows. Ain’t looking good early, though.