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The two things you need to know about the Supreme Court’s new Obamacare case

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There are two important points to know about King v. Burwell, the new Obamacare challenge that the Supreme Court agreed to hear Friday.

One: The Supreme Court only takes 1.1 percent of the cases presented to it. The fact that they took this one is solid evidence that at least four justices — and maybe more — are considering gutting Obamacare in 36 states.

Two: The lawsuit is a genuinely existential threat to Obamacare. If the Supreme Court rules for the plaintiffs the law's exchanges will collapse in those 36 states.

Let's dig into both of those in a bit more detail.

The Supreme Court didn't have to take this case. But four justices wanted to.

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(Alex Wong / Getty News Images)

The Supreme Court doesn't have to accept any old case that turns up at its doorstep. If the Court is fine with a lower court's ruling, it can simply let the issue be. It takes four justices agreeing that it's a good idea to revisit a prior ruling in order for it to be heard. Usually that doesn't happen: the Supreme only grants 1.1 percent of the cases presented.

So just the fact that the Supreme Court decided to hear this case — that it was the one out of 100 cases that deserved to be revisited — should trouble health law supporters. There are at least four justices who think this as issue that deserves a second look. And while that's not a Supreme Court majority, it's awful close.

It is true that the Supreme Court does currently have a circuit split on the issue; there are two appeals courts that have come to different conclusions about whether the subsidies issued in the 36 federally-run marketplaces are legal. The Fourth Circuit Court of Appeals in King v. Burwell, the case the Supreme Court took, ruled that the subsidies were legal. The District of Columbia Court of Appeals, meanwhile, came to the opposite conclusion. And the Supreme Court is often the place where circuit splits like this gets settled.

But it's been widely expected for months that the circuit split would disappear. The District of Columbia Court of Appeals will re-hear its case next month en banc and, because it's generally a more liberal court, is expected to reverse the ruling against the subsidies.

If the Supreme Court didn't want to grapple with this particular Obamacare issue, it could have waited for that reversal and let the appeals court rulings stand. But that's not what happened: the justices decided to grab it while the courts were still divided.

King could have disastrous consequences for Obamacare

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If the Supreme Court sides with the challengers it would, as former Obama adviser Zeke Emanuel put it this afternoon, create a "very nasty situation."

That's an understatement: the subsidies are absolutely crucial to how the Affordable Care Act's insurance expansion. Without them, the structure of the law collapses.

At its simplest, Obamacare is a three-pronged approach to increasing the number of people with health insurance coverage (this is something former Obamacare adviser and MIT economist Jonathan Gruber describes as a three-legged stool).

First, there's the end of pre-existing conditions, which opens the individual market to everybody. Then, there's the individual mandate: the requirement to buy coverage that gets healthy people (and not just the sick) to sign up. And last, there are the subsidies, the part of the law that makes the thing the government is requiring people to buy and requiring insurers to sell affordable.

The subsidies in Obamacare are big: the Urban Institute estimates that, in the Healthcare.gov states, a collective 7.3 million people are receiving $36 billion in financial help.

And pretty much everyone who works in health policy — especially the people who wrote Obamacare — knows they're important. Every Congressional staffer I've talked to about the issue has said, of course Obamacare meant to have subsidies in every state; the alternative is just too screwed-up to imagine passing into law.

Knock out any part of this, and the whole expansion falls apart. A two-legged stool doesn't stand up. King threatens to knock out the subsidies in the 36 states that use a federally-facilitated health insurance exchange. And this would leave the law in a nearly-unworkable situation, requiring low-income people to buy health insurance that they can't afford.

Some low-income Americans would have an out: Obamacare gives anyone who can't find a plan that costs less than 8 percent of their income a free pass on the individual mandate. If you can't find affordable coverage, legislators' thinking went, you shouldn't have to buy a plan.

But they would also be without health insurance coverage, and expanding coverage is the whole point of Obamacare. If the Supreme Court rules in favor of the challengers, it would leave millions of people without any affordable option — essentially where they were before Obamacare became law.