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Washington (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 foes - who had railed against the rule requiring coverage for contraceptives as a violation of religious freedom - signaled that some 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 final 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, announced on January 20, had sparked an outcry not only from Catholic leaders but social conservatives, including Republican presidential hopefuls. It even drew opposition from several Democratic lawmakers from heavily Catholic states and sowed 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.
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
"I don't care what deal he cuts," Republican presidential contender Newt Gingrich, speaking to the Conservative Political Action Conference, said about the birth-control rule change. "If he is re-elected he will wage war on the Catholic Church the day after (he is elected). "We don't trust him."
Obama's policy shift was aimed at preventing the controversy from becoming a liability for him with Catholic voters, while at the same time trying not to anger his liberal base.
But Republicans risk alienating some moderate independent voters by hammering on such a divisive social issue at a time when polls show most Americans support birth-control coverage and the fragile economy tops the public's agenda.
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 in Washington, the national college of the Catholic Church -- which opposes most methods of birth control -- reaction to the compromise was mixed.
Kerry McNamara, studying to be a social worker, 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.
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 White House was caught off guard by the fury sparked by the original rule, which was met with a lobbying blitz from both allies and foes pressing the president to give ground.
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.
"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 intense internal debate in the administration. Prominent Catholics in the White House - including Vice President Joe Biden and Defense Secretary Leon Panetta - 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.