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This is the big one, Elizabeth!

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In the TV show “Sanford and Son,” the title character Fred Sanford was famous for clutching his chest, looking heavenward and gasping, “This is the big one, Elizabeth!”

For those who spend their time following the ups and downs of the Affordable Care Act, a lawsuit currently before a federal court could be “the big one” for the health care act.

ACA already survived a Supreme Court ruling on the constitutionality of the individual mandate and it remains law despite another Supreme Court ruling about employers’ opting out of paying for certain contraceptive coverage. Now, the ACA is in court again, and some say that the result of this lawsuit could unravel the health care law.

The U.S. Court of Appeals for the D.C. Circuit is expected to rule soon in a lawsuit that centers on a few words in the act. But, depending on how the court interprets those few words, the result could be a huge impact on ACA.

The suit aims to block the ACA’s insurance subsidies in the 36 states where health care coverage could be purchased on the federally-facilitated exchange. The remainder of the states established their own exchanges or developed a state-federal partnership.

But back to those 36 states. The crux of the federal case, Halbig v. Sebelius, is that the Obama administration — and the Internal Revenue Service— break the law by offering those tax subsidies in all 50 states. It relies mainly on the text of the statute, which authorizes subsidies in “an exchange established by the State.”

Tax subsidies were established in the ACA as a means of making health insurance more affordable to low and moderate income purchasers. Anywhere from 5 million to 7 million Americans are receiving those subsidies, and the subsidies were a major incentive encouraging people to sign up for coverage.

The Halbig case argues that it’s legal to offer the subsidies in only the states that have their own exchanges. Those who bought coverage from the federally-established exchange would not be eligible for the subsidy.

But the Justice Department says that reading is too narrow, and the challengers have had a hard time convincing judges that Congress intended to set up a two-tiered system.

Although this case is only before an appellate court, and not the Supreme Court, ACA-watchers on both sides of the issue say that the case is significant because a ruling on the appellate level could keep the case moving up the federal court ladder. Whether it would eventually go before the Supreme Court is anyone’s guess at this point and there’s no guarantee that the high court would agree to hear arguments on the case if it did reach that level.

What happens if the court rules that the subsidies are illegal? Most of those who enrolled in coverage on HealthCare​.gov might not buy insurance next year because they will find it unaffordable at the full premium price. That, in turn, could create a much-feared “death spiral,” where insurance pools have too many sick enrollees and not enough young healthy ones. If this happens, premium rates will go through the roof and the Affordable Care Act could end up being unaffordable for most Americans.

So for now, ACA-watchers are waiting to see if an appellate court will do to the law what the 2012 Supreme Court case on the individual mandate could not do – gut and eventually kill Obamacare.

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Susan Rupe is assistant editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Connect with Susan →

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