On the line is $12 billion that health insurance providers say the government owes them after reneging on an apparent promise to pay, which was included in the law.
"This is a massive government bait and switch," declared attorney Paul Clement, representing three small insurance companies that agreed to participate in government-run health plan exchanges with the expectation that the law's "risk corridors" program would reimburse them if costs were higher than anticipated.
The provision was used to induce insurers to join the Obamacare insurance exchanges in spite of substantial financial risk.
"Congress made a clear money-mandating promise to pay," Clement said. "When it became time to pay, the government pointed to appropriations riders," which lawmakers used to limit funds paid out.
Eighteen of 24 insurance providers that joined the insurance exchanges went out of business after the government stopped making the risk corridors payments. Several others either stopped offering Affordable Care Act plans or charged significantly higher premiums.
The Trump administration argues the health law's promise to pay insurers was implicitly contingent on Congress appropriating the funds. When lawmakers later chose to limit the funds, the money rightfully didn't flow, they say.
"The appropriations clause of the Constitution is central to this case," said Deputy Solicitor General Edwin Kneedler. "This is not a contract."
The case has implications for public-private partnerships across the country and could adversely impact trust in the government as a business partner, especially in cases of financial risk.
"Why does the government not have to pay its contracts like anybody else?" questioned Justice Stephen Breyer. "All the statutes that say, 'if you do X, the government shall pay you, Mr. Veteran, Mr. Paratrooper, Mr., you know, you name it,' -- they don't really mean it. Is that what it is?"
Chief Justice John Roberts appeared similarly sympathetic to the insurers. "You don't question that these insurance companies would not have participated in the risk corridors program but for the government's promise to pay?" Roberts asked Kneedler.
Justice Samuel Alito signaled skepticism of a giant payout, suggesting that the insurers should have known the funds were never an absolute guarantee.
"Can you identify any source that can be used to pay these billions of dollars?" Alito asked of Clement. "Has there ever been a case where this Court has, in effect, required Congress to appropriate ... billions of dollars for private businesses?"
The case will be decided by the end of June.