By Stephanie Simon and Caren Bohan
(Reuters) - President Barack Obama, in an abrupt policy shift aimed at quelling an election-year firestorm, announced on Friday that religious employers would not be required to offer free birth control to workers and the onus would instead fall on insurers.
But Catholic Church leaders and Obama's Republican opponents - who had railed against the rule requiring coverage for contraceptives as a violation of religious freedom - signaled that divisions remain and the hot-button issue could stay alive in the 2012 presidential race.
The compromise by Obama sought to accommodate religious organizations, such as Catholic hospitals and universities, outraged by a new rule that would have required them to offer free contraceptive coverage to women employees.
Instead, the revised approach puts the burden on insurance companies, ordering them to provide workers at religious-affiliated institutions with free family planning if they request it, without involving their employer at all. Insurers voiced concern, raising questions about whether they were consulted about the change.
"Religious liberty will be protected, and a law that requires free preventive care will not discriminate against women," Obama told reporters in the White House briefing room as he sought to put the political furor to rest.
The U.S. Conference of Catholic Bishops called it a "first step in the right direction" but the group said it was still concerned about the issue and would reserve judgment.
Weighing in publicly on the matter for the first time, Obama acknowledged that religious groups had genuine reasons for their objections, but he accused some of his opponents of a cynical effort to turn the issue into a "political football."
The rule had sparked an outcry not only from Catholic leaders but from social conservatives, including Republican presidential hopefuls on the campaign trail. It had also sown dissent among some of Obama's top advisers.
Health insurance giant Aetna Inc said it would comply with the policy but needed "to study the mechanics of this unprecedented decision before we can understand how it will be implemented and how it will impact our customers."
The health industry trade group AHIP expressed concern about the precedent Obama's new policy would set and said it would comment further as it learns how the rule will be implemented.
AVOIDING CAMPAIGN LIABILITY
Republicans have seized on the issue, seeing a chance to paint Obama as anti-religion and put him on the defensive as signs of economic improvement appear to have re-energized his re-election bid.
The policy shift was aimed at preventing the controversy from becoming a liability for Obama with Catholic voters, while at the same time trying not to anger his liberal base.
Sister Carol Keehan, president of the Catholic Health Association of the United States, welcomed the move, saying she was "pleased and grateful that the religious liberty and conscience protection needs of so many ministries that serve our country were appreciated."
At Catholic University of America in Washington, the national university of the Catholic Church, reaction to the compromise was mixed, with students either expressing support for, or opposition to, the church's position on the issue.
The Catholic Church opposes most methods of birth control.
Kerry McNamara, a social work student, said most people she had talked to on campus opposed the White House's original ruling. "It's definitely an improvement," said McNamara, 20, referring to the new regulation. "But I personally am not for birth control."
A spokesman for House of Representatives Speaker John Boehner, the top Republican in Congress, said the compromise did not fully address the concerns of the Catholic Church and again signaled the party would try to rescind the rule. Prospects for that are dim in a deeply divided Congress.
The controversy has pushed a sensitive social issue into the media spotlight ahead of November 6 presidential and congressional elections. Republicans hope to use it to galvanize their conservative base, but it is unclear whether it will resonate with the broader electorate.
The regulation at the center of the controversy requires religious-affiliated groups such as charities, hospitals and universities, but not churches themselves, to provide employees with coverage for birth control as other health insurance providers must do.
PASTORS, PETITIONS SOUGHT CHANGE
Obama insisted the revised policy, which came after he ordered aides to speed up their review of the rule, would ensure religious liberty while protecting women's health.
The compromise was crafted by employees of the White House Office on Faith Based and Neighborhood Partnerships. Sources close to the deliberations said many in the office were dismayed by the original plan released by the administration last month.
With hundred of pastors across the country reading letters of protest during Mass and tens of thousands of concerned citizens signing an online petition demanding changes, members of the White House's faith-based team scrambled to come up with an alternative that would still meet the administration's goal of expanding access to family planning for all women.
"Honestly, it's a win for all sides. It's huge," said Stephen Schneck, a political scientist at Catholic University who has advised the administration on outreach to Catholics.
The issue had triggered internal debate at the White House.
Prominent Catholics in the White House - including Vice President Joe Biden, Defense Secretary Leon Panetta, and longtime Obama aide Denis McDonough - were said to have helped drive the compromise.
The plan announced Friday was one of the few possible solutions that would not have required legislation, but could be imposed by executive order.
The policy shift was welcomed by some women's groups. Cecile Richards, president of Planned Parenthood Federation, issued a statement saying the new plan "does not compromise a woman's ability to access these critical birth control benefits."
Polls indicate a majority of Americans and Catholics support requiring contraception coverage. A Public Religion Research Institute poll last week found 55 percent of Americans want employers to provide healthcare plans that cover contraception and birth control, including nearly six in 10 Catholics.