White House to Allow Insurers to Continue Canceled Health Plans

WASHINGTON—President Barack Obama said Thursday that insurers will be able to continue health-insurance coverage next year for current policyholders that otherwise would be canceled under the new health-care law.

The change marks a significant policy retreat by the president, one that he hopes will quell an intensifying protest over his faulty promise that Americans can keep their insurance plans under the new law.

Mr. Obama's announcement came on the eve of a House vote on a Republican bill to change the law, which was gaining traction among Democrats, particularly after the administration's release Wednesday of low enrollment figures for the first month of the federal government's problem-prone online insurance marketplace.

With millions of Americans set to lose their current health insurance, Mr. Obama said he understands that getting a cancellation notice is upsetting, "particularly after assurances they heard from me that if they had a plan that they liked they could keep it." He added: "To those Americans, I hear you loud and clear. I said that I would do everything we can to fix this problem. And today I'm offering an idea that will help do it."

He said that while Americans who received cancellation letters can renew those insurance plans next year, they should examine other options available on state and federal insurance marketplaces since they may be cheaper and offer more coverage.

"This fix won't solve every problem for every person, but it will help a lot of people," Mr. Obama said.

He also said that the rollout of the federal website, HealthCare.gov, which was launched on Oct. 1, has been frustrating. "It is fair to say that the rollout has been rough so far," he said. He said that had he known the extent of the website's problems, it wouldn't have been opened on Oct. 1.

"You know, I'm accused of a lot of things, but I don't think I'm stupid enough to go around saying, 'This is going to be like shopping on Amazon or Travelocity,' a week before the website opens, if I thought that it wasn't going to work," he said. "So, clearly, we and I did not have enough awareness about the problems in the website."

It was unclear whether Mr. Obama's move will derail the growing rebellion in his own party and soften critics who have for weeks pressured the president to help the millions of Americans who are set to lose their current health insurance despite his personal assurances they wouldn't.

House Speaker John Boehner (R., Ohio) questioned whether Mr. Obama's plan would be legal or effective, and he said his caucus would move forward with Friday's vote.

"I am highly skeptical that they can do this administratively," Mr. Boehner said Thursday, calling for the entire health law to be scrapped. "There is no way to fix this."

House Minority Leader Nancy Pelosi (D., Calif.) prepared to meet with House Democrats later Thursday to gauge support for Mr. Obama's plan and a backup legislative strategy being developed by House Democrats. White House Chief of Staff Denis McDonough is expected to attend the session after briefing Senate Democrats about the White House plan.

Mrs. Pelosi declined to comment on any details of the two-part, belt-and-suspenders approach. She stopped short of directly saying that Democratic anxiety would be quelled by either plan, noting that "we still have to discuss this with members."

"We'll be good," Mrs. Pelosi told reporters. "We'll do what we have to do."

She said the trick would be to "make sure you're not sowing seeds for higher costs to other people down the road. So this is not just about PR or 'I need a vote'—it's about what we do and how that safeguards the affordability of this down the road."

Senior White House officials said Thursday the administration would send letters to state insurance commissioners telling them that insurance carriers wouldn't be required under the federal health law to drop policies because they didn't meet the new coverage standards for 2014. Officials also said letters will be sent to insurers in the individual and small-group market notifying them that they can renew policies through next year and be in compliance with the health law.

Under the Obama plan, insurers are required to notify consumers whether their renewed plans don't include coverage that was required under the new health law, which set minimum coverage standards. They must tell consumers that new insurance options and possibly tax subsidies may be available for policies bought through online federal marketplace.

Insurers won't be able to sell so-called substandard plans to new consumers, only to those who already were enrolled in plans that don't meet the law's coverage requirements. That is a difference from the bill proposed by Rep. Fred Upton (R., Mich.), the one due for a House vote Friday, which would allow insurers to sell those plans to new consumers.

The White House believes Mr. Upton's bill goes too far in trying to address the cancellation problem, and it had been scrambling to come up with a fix before it was put to a vote. But the bill had gained backing this week from some nervous Democrats, further spooked by the low enrollment figures.

In his televised remarks Thursday, Mr. Obama again apologized and tried to explain his earlier pledge that "if you like your insurance plan, you can keep it."

"There is no doubt that the way I put that forward unequivocally ended up not being accurate," he said. "It was not because of my intention not to deliver on that commitment and that promise. We put a grandfather clause into the law but it was insufficient."

The administration's enrollment figures released Wednesday showed just 26,794 Americans had signed up for private health plans through the federal marketplace during its first month. The numbers fell short of the 79,391 people who enrolled through the state-run exchanges, and far short of the administration's projection of about 500,000 private-insurance enrollments through the state and federal exchanges.

White House officials said they didn't know how many insurers would take up the new option. Several state insurance commissioners have been critical of carriers that did try to encourage current enrollees to renew their policies, accusing the insurers of trying to prevent people from accessing the full benefits of the overhaul law.

The administration shift had long been considered anathema by many supporters of the law, who wanted to end the sale of what they described as skimpy coverage.

Administration officials described it as a temporary move designed to smooth transitions for a specific group of people, some of whom are being asked to pay higher premiums for policies for more comprehensive plans that replace policies that have been canceled. Many are having trouble using the government's online insurance marketplace to comparison shop for new policies.

It is unclear whether the move will alleviate political pressure on the administration and how it could affect the success of the new insurance marketplaces.