DOJ's decision is the latest in a slate of moves by the Trump administration aimed at weakening the ACA, after failing to repeal it in Congress.
Payers now face even more uncertainty as they set premiums for 2019.
Other efforts by the administration, including rule-making around short-term, limited duration health insurance and association health plans are likely to be finalized soon, which critics say could further destabilize the market.
The action, which took even some Democrats by surprise, will also have political implications with the midterm election this fall.
Democrats are already messaging heavily on healthcare, and will now argue the administration is fighting to take away coverage from those with pre-existing conditions.
That provision of the law is among the most popular.
The DOJ did not go as far as the group of GOP attorneys general who brought the court case, Texas v. United States of America, stating that the ACA’s exchanges, subsidies and Medicaid expansion “are severable from the individual mandate.”
“Although Plaintiffs speculate as to a chain reaction of failed policymaking that could occur once the individual mandate is struck down, they cannot show that striking down the individual mandate, guaranteed-issue, and community-rating requirements means that the ACA necessarily ‘ceases to implement any coherent federal policy,’” DOJ writes.
The insurance lobby, America's Health Insurance Plans, said that it will file an amicus brief that opposes the GOP "state plaintiffs’ request for emergency relief, and provides more detail about the harm that would come to millions of Americans if the request to invalidate the ACA is granted in whole or in part.”
The group added that 2019 premium rates are already spiking higher due to the zeroing out of the individual mandate, and that further disruption would induce more uncertainty.
“Zeroing out the individual mandate penalty should not result in striking important consumer protections, such as guaranteed issue and community rating rules that help those with pre-existing conditions. Removing those provisions will result in renewed uncertainty in the individual market, create a patchwork of requirements in the states, cause rates to go even higher for older Americans and sicker patients, and make it challenging to introduce products and rates for 2019," AHIP said in a statement.
California Attorney General Xavier Becerra and 15 other attorneys general filed a brief opposing the lawsuit Thursday.
“The lawsuit initiated by Texas is dangerous and reckless and would destroy the ACA as we know it. It would leave millions of Americans without access to affordable, quality healthcare. It is irresponsible and puts politics ahead of working families,” the Democrat said in a statement.
While the DOJ under President Barack Obama chose not to defend the Defense of Marriage Act, University of Michigan health law professor Nicholas Bagley still called this administration's decision to not defend the ACA unprecedented.
“I for one am concerned. No, I’m frightened. Not so much about the ACA: I still regard it as extremely unlikely that the Supreme Court will adopt an argument as far-fetched as the one that the states have advanced. And, so far as I can make out, the Trump administration will continue to enforce the ACA while the litigation progresses. No, I’m frightened for what this says about the rule of law,” Bagley wrote in The Incidental Economist.