But even if the tax-free mandate were found to be unconstitutional, that should not doom other parts of the law, including provisions expanding Medicaid and protecting preexisting conditions, Becerra argued.
The Affordable Care Act remains in effect during the appeal.
The 5th Circuit Court introduced a new wrinkle when, less than two weeks away from oral arguments, it ordered all sides to submit briefs discussing whether the Democratic-run states, as well as the U.S. House, had standing to appeal O'Connor's ruling.
Supporters of the law were alarmed by the request, noting that O'Connor's decision would stand if the appeal is tossed out on procedural grounds.
Responding Friday, Becerra argued that the Democratic-led states were entitled to intervene in the case because O'Connor's ruling would cause them direct financial harm -- most notably $418 billion in federal money to pay for expanded Medicaid coverage over the next decade.
The states also would be on the hook for millions of dollars to reprogram Medicaid eligibility standards and for higher costs in uncompensated medical care, Becerra said.
"That would lead to the same vicious cycle that plagued the health-care industry before the ACA was adopted: Newly uninsured individuals would seek belated care in emergency rooms, and hospitals would have to treat them without regard to their ability to pay," he told the court.
Paxton's brief agreed that the financial costs were enough to give the Democratic states standing to appeal, but it said the U.S. House should be dropped because it joined the lawsuit too late and because one house of Congress lacks the authority to challenge a ruling that invalidates a law.
"The Court should reach the merits of this appeal and affirm the judgment below declaring the ACA unlawful in its entirety," Paxton wrote.