* 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 (Recasts lead, adds fresh quotes, reaction and details)
By David Morgan
WASHINGTON, Feb 1 The Obama administration on Friday sought to settle a dispute with some religious leaders over the inclusion of contraceptives in employees' health insurance plans by proposing to separate birth control from other benefits.
The approach offers religious employers a way to avoid paying for women's contraceptives through employer-provided health insurance, while still guaranteeing their workers access to birth control coverage with no out-of-pocket costs as called for in President Barack Obama's healthcare reform law.
It follows months of protest and legal action by groups representing Roman Catholics, Protestant evangelicals and private employers, who argued that the 2010 healthcare law forced them to violate their religious tenets against contraception.
For more than a year, the Obama administration has grappled with how to balance its desire to guarantee universal, free contraceptive coverage with religious freedoms provided in 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 some sort of accommodation for religious employers.
The new rules, which would largely leave contraceptive coverage to outside insurers, consolidate many of the ideas administration officials voiced a year ago, 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."
Cardinal Timothy Dolan of New York and other leading voices in the Roman Catholic community said they would study the proposal but offered no immediate response. However, other groups expressed disappointment over the rule, including the exclusion of for-profit businesses from its terms.
"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 the legal challenges to the policy. He called it "very disappointing."
"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.
Meanwhile, Catholics United, a group with a history of supporting liberal causes, applauded the move. "This is a victory not only for the Obama Administration, but for the Catholic Church," said James Salt, executive director of Catholics United.
The mandate contained in Obama's Patient Protection and 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.
The new rule makes clear that churches and other places of worship remain exempt even when they operate parochial schools and social services such as soup kitchens that benefit or employ people of different religious faiths.
But the change did not alter the administration's 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.
People who work for religious affiliates that self-insure would receive coverage through a private insurer arranged by a third-party administrator. Those insurers would be compensated by lower user fees for participation in state-based healthcare exchanges, which are scheduled to begin operating on Jan. 1, 2014.
The proposed rules, published in the Federal Register, are open for public comment through April 8. (Additional reporting by Atossa Abrahamian in New York; Editing by Karey Wutkowski and Jackie Frank)