Sebelius' resignation comes just over a week after sign-ups closed for the first year of insurance coverage under the so-called Obamacare law. The opening weeks of the enrollment period were marred by widespread website woes, though the administration rebounded by enrolling 7.1 million people by the March 31 deadline, exceeding initial expectations.
Even with the late surge in sign-ups, the law remains unpopular with many Americans and Republicans have made it a centerpiece of their efforts to retake the Senate in the fall.
Sebelius' resignation could also set the stage for a contentious confirmation hearing to replace her. In a sign that the White House is seeking to avoid a nomination fight, the president was tapping Sylvia Mathews Burwell, the director of the Office of Management and Budget, to replace Sebelius. Burwell was unanimously confirmed by the Senate for her current post.
A White House official requested anonymity to confirm Sebelius' resignation and Burwell's nomination ahead of the formal announcement. Obama has not nominated anyone to replace Burwell as budget director.
Obama remained publicly supportive of Sebelius throughout the rough rollout, deflecting Republican calls for her resignation. But she was conspicuously not standing by his side last week when he heralded the sign-up surge during an event in the White House Rose Garden.
The official said the 65-year-old Sebelius approached Obama last month about stepping down, telling him that the sign-up deadline was a good opportunity for a transition and suggesting he would be better served by someone who was less of a political target.
A spokeswoman for Sen. Pat Roberts, a Republican from Sebelius' home state of Kansas, called the resignation "a prudent decision" given what she called the total failure of Obamacare implementation.
Sebelius dropped no hints about her resignation Thursday when she testified at a budget hearing. Instead, she received congratulations from Democratic senators on the sign-up surge.
Sebelius has been one of Obama's longest-serving Cabinet officials and his only HHS secretary. She was instrumental in shepherding the health care law through Congress and implementing its initial components.
But Sebelius' relationship with the White House frayed during the fall rollout of the insurance exchanges that are at the center of the sweeping overhaul. The president appeared caught off guard by the extent of the website woes.
After technical problems crippled online sign-ups after the Oct. 1 launch, the White House sent Obama adviser Jeffrey Zients to oversee a rescue operation that turned things around by the end of November. After taking helm of the project, Zients said management issues were partly to blame but did not point the finger at any individuals.
Sebelius took responsibility for the chaotic launch of the website and asked the HHS inspector general to conduct an investigation. That report is not expected for months.
In nominating the 48-year-old Burwell, Obama is tapping a Washington veteran with a low-profile and the respect of some Republicans on Capitol Hill. Burwell held several White House and Treasury posts during President Bill Clinton's administration.
Between her stints in the executive branch, Burwell served as president of Wal-Mart's charitable arm and head of the global development program at the Bill and Melinda Gates Foundation.
If confirmed, Burwell will have to contend with huge challenges related to the continued implementation of the health overhaul, as well as the divisive politics surrounding the law that show no sign of abating.
On the practical side, the administration has to improve customer service for millions of Americans trying to navigate the new system. There's also a concern that premiums may rise for 2015, since many younger, healthier people appear to have sat out open enrollment season.
On the political front, congressional Republicans remain implacably opposed to Obamacare, even as several GOP governors have accepted the law's expansion of Medicaid. GOP opposition means Republicans can be expected to continue to deny additional funds for implementation.
Senate Minority Leader Mitch McConnell., R-Ky., welcomed Sebelius' resignation but appeared to indicate an openness to a dialogue with Burwell, the new HHS nominee — even as he declared that "Obamacare has to go."
"I hope this is the start of a candid conversation about Obamacare's shortcomings and the need to protect Medicare," McConnell said.