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Cheap solutions to Obamacare challenge could work: Experts

Ambiguous language in the Affordable Care Act threatens the subsidies of millions of people who bought insurance on the federal Obamacare health exchange.

But that same vague language also might allow states that want to get those subsidies back for residents to adopt solutions that cost just several hundred dollars—or even less—instead of spending tens of millions of dollars to build their own online exchange, several Obamacare experts said.

Those possible workarounds include formally contracting with the federal government to do Obamacare enrollment for the states, buying a dirt-cheap version of HealthCare.gov's software or setting up an inexpensive website that does nothing much beyond directing visitors to HealthCare.gov for sign-ups.

"It seems like there's some fairly low-cost ways to get there," said Douglas Holtz-Eakin, a former director of the Congressional Budget Office and founder of the Center for Health and Economy think tank.

"I can think of a couple," Holtz-Eakin said, adding, "but none of them are perfect."

A woman sits with an insurance agent as she inquires about purchasing health insurance under the Affordable Care Act at a kiosk at the Mall of the Americas on Dec. 22, 2013 in Miami.
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A woman sits with an insurance agent as she inquires about purchasing health insurance under the Affordable Care Act at a kiosk at the Mall of the Americas on Dec. 22, 2013 in Miami.

A top federal appeals court panel on Tuesday ruled that the Obama administration was violating the law by issuing subsidies to nearly 5 million enrollees in 36 states on the federal insurance exchange, HealthCare.gov. Those people's low or moderate incomes qualified them for the assistance.

The D.C. Circuit court panel's ruling is based on the claim that the Affordable Care Act only allows financial aid to those who signed up through a state-run Obamacare exchange. Fifteen such exchanges have been built, including the District of Columbia's.

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The decision was based on explicit language in the ACA that authorizes subsidies to be issued through a state-established exchange—the ACA does not likewise explicitly say the subsidies can be issued through a federal exchange.

On the same day, a judicial panel in another federal appeals court, the 4th Circuit in Virginia, found that subsidies issued to federal exchange enrollees are legal, although it conceded that the ACA language is ambiguous.

While that split exists between the two circuits, the subsidies remain in effect. The Obama administration plans to ask the entire D.C. Circuit to reverse its panel's decision.

But if the Supreme Court takes up the issue and eventually declares that the D.C. appeals court ruling is correct, then the administration will face two options: trying to get Congress to rewrite the ACA to allow subsidies to be issued through the federal exchange; or getting each of the 36 states that don't run their own exchange to "establish" such a market and start selling Obamacare plans.

Few, if any, Obamacare critics or advocates expect that getting a fix through Congress is a viable option at the moment, given Republican control of the House of Representatives.

That would leave it up to individual states to set up their own exchanges, if they wanted to maintain federal financial aid for qualified residents.

"The states have to affirmatively say they want to do this," said Holtz-Eakin.

Law professor Timothy Jost, a leading Obamacare expert, noted that a number of Republican-led states are extremely unlikely, in the near term, to move to set up their own exchanges because of their governors' or legislatures' hardcore opposition to the ACA.

Read MoreAppeals court split on Obamacare subsidies

"They'll die before they let their residents get tax credits," Jost said.

But some of the 36 states may want to preserve the tax credits that helped an estimated 4.7 million of their residents buy coverage. And if they do want to so, they might be helped in doing that on the cheap, because of the ACA's ambiguous language.

While that law says subsidies have to be issued through an exchange established by a state, "there's no definition of what 'established by the state means,'" said Abigail Moncrieff, a Boston University law professor.

Moncrieff and others said that lack of definition could give states substantial leeway in tackling the subsidy issue, without having to necessarily build a stand-alone exchange from scratch at the cost of tens of millions of dollars or more.

"I think there are lot things that will work," Moncrieff said.

H. Guy Collier, a lawyer in the health practice of the firm McDermott Will & Emery, suggested that one potential solution is for a state to formally declare that the state has established an exchange, but then contract out all of the functions of that marketplace to HealthCare.gov.

"There's a possibility they could do that," Collier said. But, he added, "It's not free from doubt."

In advance of Tuesday's dueling appellate opinions, Obamacare blogger Charles Gaba, who has been tracking enrollment in exchange-sold plans, wrote an article with the headline, "I can save the Affordable Care Act for just $360.00!!"

Gaba wrote there is "an incredibly stupid-sounding solution" to the problem of a potential Supreme Court ruling invalidating the HealthCare.gov subsidies. That solution, Gaba said, is having each of the 36 states spend about $9.95 apiece—or less—on website domain names that would say things like "HealthcareAlabama.gov," or "HealthcareAlaska.gov."

"Then, just set up those domains names to repoint to the appropriate subsection of HealthCare.gov," Gaba wrote.

Gaba suggested that would be enough to have a state "establish" an exchange, without actually having to do the heavy lifting of enrolling them in coverage.

Moncrieff said that idea is not as harebrained as it might appear.

"It's possible that, yes, you could set up a fake portal website that redirects to HealthCare.gov," she said. "It's possible that this could be a very cheap, easy fix."

And even if that solution wasn't legal under the ACA, it could take years of new litigation to resolve that question—which would keep the subsidies flowing, she said.

Holtz-Eakin said there might be an even cheaper solution.

Read MoreCourts could cause big Obamacare $$$ hike

He said the federal government could make "36 copies" of HealthCare.gov's software, "and sell them for a buck apiece to the states affected."

For now, however, the Obama administration is hinging its hopes on getting the D.C. Circuit to reverse the panel's ruling that declared the subsidies were illegal.

The White House declined to comment when asked by CNBC whether federal officials were considering any workarounds to the subsidy problem if the Supreme Court takes the case and rules against the administration.

That didn't surprise Holtz-Eakin.

"I don't think they're doing anything right now" in terms of a workaround, he said. "They're going to make sure the money keeps flowing, and they're going to look at this in terms of erecting a legal firewall ... any public movement to explore these ideas suggests the courts are right, and they're not going to allow it."

—By CNBC's Dan Mangan

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