It's time for the White House to start sweating over a legal challenge to ObamaCare subsidies

At issue in the case are the subsidies that the federal government provides for individuals purchasing insurance through Obamacare. Though the text of the law says the subsidies were to go to individuals obtaining insurance through an “exchange established by the state,” a rule released by the Internal Revenue Service subsequently concluded that subsidies would also apply to exchanges set up on behalf of states by the federal government.

The case before the appeals court, Halbig v. Sebelius, is one of several challenging the IRS rule.

Were the case to succeed, it would mean that dozens of state governments opposed to Obamacare could significantly narrow its scope by refusing set up exchanges, thus preventing residents from claiming subsidies. In those states, employers wouldn’t be penalized for failing to offer qualifying insurance (which is triggered by workers seeking federal subsidies), meaning that anti-Obamacare states could become more attractive to businesses trying to get around the employer mandate. It would also increase pressure on Congress to undo the individual mandate.

On the flip side, such a ruling would also place pressure on anti-Obamacare governors, who would be forced to decide whether to stand firm in opposition to Obamacare or to set up their own exchanges so residents can apply for subsidies.