* Religious employers could opt out of contraceptive benefit rule
* Roman Catholic community is studying Obama's proposal
* Insurers would pick up the cost of birth control coverage (Edits; adds reaction in paragraphs 14-16 and other details)
By David Morgan
WASHINGTON, Feb 1 (Reuters) - The Obama administration on Friday sought to settle a dispute with religious leaders over whether employees at faith-affiliated universities, hospitals and other institutions should have access to health insurance coverage for contraceptives.
The new set of proposals would instead guarantee that employees at religious nonprofits would get access to birth control coverage without out-of-pocket costs through separate plans with insurers picking up the tab.
The rules follow months of protest and legal action by groups representing Roman Catholics, Protestant evangelicals and private employers.
They have argued that President Barack Obama's 2010 Patient Protection and Affordable Care Act forces them to violate their own religious tenets against contraception.
For more than a year, the Obama administration has grappled with how to balance its desire to guarantee universal contraceptive coverage with religious freedoms provided by the U.S. Constitution.
Faced with the ire of religious leaders and social conservatives in the midst of a heated presidential campaign, Obama said last February that he would create an accommodation for religious employers under the law.
The new rules from the Department of Health and Human Services consolidate many of the ideas administration officials voiced then, but in greater detail.
"Today, the administration is taking the next step in providing women across the nation with coverage of recommended preventive care at no cost, while respecting religious concerns," Health and Human Services Secretary Kathleen Sebelius said in a statement.
"We will continue to work with faith-based organizations, women's organizations, insurers and others to achieve these goals."
Some leading religious figures offered a muted response. Cardinal Timothy Dolan of New York said he would study the proposal. So did the Catholic Health Association of the United States, which represents more than 1,200 hospitals and other healthcare facilities.
Other religious and social conservative groups expressed disappointment, particularly over the administration's decision not to extend the accommodation to for-profit employers.
AN UNNECESSARY ONUS
"This proposal does nothing to change the scope of religious employer exemption," said Kyle Duncan, general counsel for the Becket Fund for Religious Liberty, which is assisting in a number of legal challenges to the policy.
"The proposal has nothing to do with millions of family businesses and owners who are having their rights violated by the mandate and are currently in litigation," he said.
Women's rights advocates such as Planned Parenthood and the American Civil Liberties Union generally backed the regulations. But some rights groups said that separating contraceptives coverage from other health benefits posed an unnecessary onus for women to satisfy disapproving employers.
The liberal group Catholics for Choice also warned that some employees could be left in the dark about their benefits, because of a new definition for religious employers that exempts houses of worship even if they operate soup kitchens, parochial schools and other social services that are open to non-members.
"Many, if not most, of the parochial schools, social service agencies and other organizations directly affiliated with the diocesan offices and parishes are exempted from coverage completely," concluded the group's president, Jon O'Brien.
HHS said in the regulations that the change would not expand "the universe of employer plans that would qualify for the exemption" beyond what administration originally intended.
The mandate contained in Obama's Affordable Care Act requires most employers to provide coverage for contraceptives and sterilization procedures approved by the U.S. Food and Drug Administration, including the so-called morning-after pill.
But while the new rule allowed exemptions for church-run social services, the regulations did not alter the Obama position that employees and students at religiously affiliated nonprofit groups should have access to contraceptive coverage even if their institutions object.
The rule, which requires the institutions to self-certify their status as religious nonprofits, calls on private insurers to cover contraceptives through separate individual plans with the insurer covering the cost. Officials said insurers would be compensated by lower healthcare expenses due to fewer births.
A similar accommodation for religious institutions that provide their own health insurance for workers and students would be insulated by third-party administrators.
The administrators would find an outside insurer to provide the contraceptives coverage. Those insurers' higher costs would then be compensated by lower user fees for participating in state-based healthcare exchanges, which are scheduled to begin operating on Jan. 1, 2014.
The proposed regulations are open for public comment through April 8. (Additional reporting by Atossa Abrahamian in New York; Editing by Karey Wutkowski, Jackie Frank and Eric Walsh)