The Obama administration, trying to defuse one of the most contentious issues in its healthcare law, proposed Friday a new way to shield religiously affiliated organizations, such as hospitals and universities, from having to provide contraceptive coverage directly to their employees.
Instead, the employees would obtain coverage through a separate, private insurance policy at no cost.
The proposed rule also reaffirms that churches and other houses of worship themselves are exempt from the contraceptive mandate in Obama's healthcare overhaul, and makes it easier for institutions to show that they qualify for the exemption.
For-profit businesses with more than 50 employees will still be required to provide health coverage that includes contraceptive benefits, even if the employer has moral objections to such benefits.
The Obama administration's efforts to balance religious objections to contraception with support among public health advocates for broader access to such services has proven one of the most delicate tasks of implementing the Affordable Care Act. The law requires health plans to cover a host of preventive services without any cost-sharing for patients, such as cancer screenings and physicals. Also included are FDA-approved contraceptives for women, including emergency contraceptive pills.
That has generated controversy almost from the moment the president signed the legislation in 2010. The contraceptive mandate is at the center of numerous lawsuits challenging the law for impeding religious freedoms. Federal judges have split on the issue.
It was unclear Friday how much the administration's latest effort would quiet the battle.
Republican lawmakers and leading conservative critics of the healthcare law kept up their attacks. "Today's proposed rule does nothing to protect the religious freedom of millions of Americans," said Kyle Duncan, general counsel for the Becket Fund for Religious Liberty. The fund represents several plaintiffs suing to overturn the contraceptive mandate.
Leading advocates for reproductive rights, meanwhile, quickly hailed the administration for preserving broad access to contraceptive coverage, which Debra L. Ness, president of the National Partnership for Women & Families, called "a critical advance for women's health."
But several leading organizations representing religiously affiliated employers, including the influential Catholic Health Assn. representing Catholic hospitals nationwide, did not offer a quick judgment on the administration's latest proposal, saying they were still reviewing it.
Cardinal Timothy Dolan of New York, president of the U.S. Conference of Catholic Bishops and a leading critic of the contraceptive mandate, was similarly noncommittal Friday.
Obama administration officials hoped to satisfy these specific groups with their latest proposal.
A year ago, the administration tried to resolve the issues. But church leaders were concerned that last year's proposal was too restrictive, exempting religious organizations only if they met several tests, including a requirement that they primarily serve people who share their faith.
That could have posed a problem for churches that run parochial schools or operate services such as soup kitchens that may serve people of many faiths.
Under the new proposal, a house of worship would be exempt from the contraceptive mandate as long as it qualifies as a tax-exempt religious employer.
The administration took a second approach to try to address concerns from hospitals, charities and universities such as Notre Dame that have religious affiliations but primarily provide nonreligious services to people of many faiths. Many of these employers, like churches, object on moral grounds to providing contraceptive coverage.
The Obama administration did not exempt them in the way that churches and other houses of worship are carved out of the mandate.
Instead, administration officials proposed a complex system designed to insulate these employers from having to pay for the contraceptive coverage or even arrange it for their employees.
Employers that contract with insurance companies to provide health benefits to their employees would notify the insurer that they object to the coverage. Under the proposed regulations, the insurer would then have to offer the employees a separate contraceptive benefit at no cost to the employees.
The process would be even more complicated for self-insured religiously affiliated employers that provide health benefits themselves and rely on insurers only to administer their health benefits.
In these cases, the insurance companies would also have to provide a separate contraceptive benefit.
But the companies would be able to recover some of these costs.
The administration has proposed forgiving fees that these insurers would otherwise pay to sell insurance on new federally operated insurance exchanges next year to Americans who don't get health benefits at work.
Administration officials denied Friday that this amounted to a government subsidy for contraceptive coverage. And they continued to assert that because contraceptive services prevent unwanted pregnancies, they actually save insurers money.
Chiquita Brooks-LaSure, a deputy director at the Department of Health and Human Services' Center for Consumer Information and Insurance Oversight, said the administration was still reviewing the proposed arrangement for religiously affiliated employers and could make more changes in the future.
Health and Human Services Secretary Kathleen Sebelius described the new proposal Friday as a fair compromise.
"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," Sebelius said. "We will continue to work with faith-based organizations, women's organizations, insurers and others to achieve these goals."
David G. Savage and Christi Parsons in the Washington bureau contributed to this report.