(Bloomberg) — A U.S. Supreme Court argument over the Affordable Care Act's tax subsidies divided the justices along ideological lines, potentially leaving two pivotal members to decide the law’s fate.

Chief Justice John Roberts, who cast the decisive vote to uphold the health-care law in 2012, asked only a handful of questions and gave little indication how he will vote.

Justice Anthony Kennedy, who voted to invalidate the statute three years ago, asked questions of both sides in the one-hour, 20-minute hearing. He said limiting the tax credits to 16 states would create a “serious constitutional problem.”

A decision halting the credits in 34 states might unravel the ACA, making other core provisions ineffective and potentially causing the market for individual insurance policies to collapse in much of the country. Hospitals could be left with billions of dollars in unpaid bills.

The fight centers on a four-word phrase that has become a linchpin of the law. Challengers say that phrase limits the tax credits to the 16 states that have set up their own marketplaces, or online exchanges, for people to buy insurance.

Kennedy raised the possibility that the court would have to allow nationwide subsidies to avoid trammeling the rights of the states, which he said would face a choice between setting up their own exchanges or seeing their insurance markets collapse. Kennedy mentioned the legal doctrine of “constitutional avoidance,” under which the court tries to interpret statutes so as not to render them unconstitutional.

More natural

At the same time, Kennedy indicated he saw the challengers’ reading of the law as the more natural one.

“It may well be that you’re correct as to the words,” he told Michael Carvin, the lawyer representing four Virginians seeking to block the subsidies.

A ruling against the administration would put pressure on the states, most of them Republican-controlled, that have refused to set up their own exchanges. Residents of those states would face the prospect of losing tax credits. Congress could step in, though it is riven by opposition to the health-care law. The Obama administration says it can do little on its own.

State exchange

The measure says people qualify for tax credits when they buy insurance on an exchange “established by the state.”

The challengers say that phrase means subsidies aren’t available in 34 states that didn’t set up their own exchanges. Residents of those states instead use the federal healthcare.gov system, and an estimated 7.5 million now receive discounts.

Other justices challenged Carvin’s position. Justice Sonia Sotomayor told the lawyer that states will be “coerced” into establishing their own exchanges if the court decides in favor of those who sued.

Justice Elena Kagan suggested the court should consider the context that the law’s aim is to provide affordable health insurance.

Justices Antonin Scalia and Samuel Alito both indicated they were inclined to vote against nationwide subsidies. Scalia said Congress would intervene if a ruling against subsidies had major consequences.

“You really think Congress is just going to sit there while all of these disastrous consequences ensue?” he asked.

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