WASHINGTON — Millions of people facing the cancellation of health-insurance policies will be allowed to buy catastrophic coverage and will be exempt from penalties if they go without insurance next year, the Obama administration said late Thursday.
Kathleen Sebelius, secretary of health and human services, disclosed the sudden policy shift in a letter to Sen. Mark Warner, D-Va., and five other senators.
It was another effort by President Obama to cushion the impact of the health-care law and minimize political damage to himself and Democrats in Congress who adopted the law in 2010 over solid Republican opposition.
In recent weeks, insurers have told many people their insurance policies were being canceled because the policies did not comply with the minimum coverage required by the law. Insurers usually offer to replace the coverage with new policies that do comply.
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The Department of Health and Human Services issued a bulletin Thursday advising consumers: “If you have been notified that your individual market policy will not be renewed, you will be eligible for a hardship exemption and will be able to enroll in catastrophic coverage.”
The help for people with canceled policies was offered late Thursday, four days before the deadline for people to sign up for coverage that starts Jan. 1.
Sebelius said the goal was to ensure “the smoothest possible transition” for people seeking to replace canceled policies.
Obama initially tried to address a furor over the cancellations by asking carriers to reinstate the policies. But some insurers and some state officials did not go along with his request, so the administration looked for other ways to address the problem.
Before the new change was announced, Republicans had said it was likely the number of cancellations would exceed the number of people obtaining private coverage through the new insurance exchanges this year.
Nearly 365,000 people selected health plans in the exchanges in October and November, before a big increase reported this month.
Catastrophic plans provide basic coverage and are generally available on the exchanges only to people who are younger than 30 or who qualify for a hardship exemption from the requirement to carry insurance.
The action is sure to embolden Republicans clamoring for a broader exemption that would be available to all Americans.
The administration opposes such an exemption, saying it would blow up the keystone of the 2010 law.
Insurers, already struggling with problems caused by the chaotic debut of the federal insurance exchange in October, expressed surprise and dismay. “This latest rule change could … lead to further confusion and disruption for consumers,” said Karen Ignagni, the president of America’s Health Insurance Plans, a trade group.