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In addition, Anderson called the changes "bad news for all who love religious freedom."

Religious nonprofits only

The proposed rules explicitly state that the exemption is only available to a nonprofit that "holds itself out as a religious organization."

That leaves open the controversy over closely held or family-owned for-profit corporations that also oppose the mandate on religious grounds, including high-profile, retail-craft chain Hobby Lobby, owned by the evangelical Green family, as well as the for-profit Bible publisher Tyndale House.

"Today's proposed rule does nothing to protect the religious liberty of millions of Americans," said Kyle Duncan, general counsel for the Becket Fund for Religious Liberty, which represents many of the organizations suing the government. "The rights of family businesses like Hobby Lobby are still being violated. … We're doubtful that anyone who wasn't already covered by the exemption will be covered by it. The administration itself is saying it doesn't make any difference to the scope."

The 10th Circuit Court of Appeals denied Hobby Lobby's request for an injunction against the mandate in December 2012, when it ruled that the requirement for Hobby Lobby to cover contraceptives did not violate the individual owners' religious freedom. When Hobby Lobby appealed the decision to the Supreme Court less than a week later, Justice Sonia Sotomayor dismissed the claim.

Tyndale has had more success in court: The D.C. District Court granted Tyndale a preliminary injunction, ruling that "the beliefs of Tyndale and its owners are indistinguishable." But Bowman says that ruling is temporary, pending an appeal by the government.

"Tyndale … exists to evangelize, but it's organized as a for-profit, so [the mandate] still applies 100% to Tyndale house under this new rule," Bowman said.

The new rules also do not apply to secular pro-life nonprofits that oppose contraception.

"Once again, President Obama's so-called 'compromise' is unacceptable—religious and moral freedom is not up for negotiation," said Susan B. Anthony List president Marjorie Dannenfelser. "There must be no religious 'test' by the government as to who, and what type of entities, are entitled to a conscience. We demand respect for non-religious entities such as the Susan B. Anthony List that recognize the taking of human life is the antithesis of health care."

Religious colleges, however, can follow the same rules for student coverage as they do for employee coverage.

The change comes after a D.C. Circuit Court of Appeals ruling in December in favor of Wheaton College and Biola University. The court ruled that HHS must not enforce the mandate for employer-provided contraceptives (as currently outlined in the Affordable Care Act) against the two schools, as well as make good on a previous promise to establish a new rule regarding enforcement of the mandate for religious employers by March 2013.

According to a statement, the Becket Fund is still examining "what effect, if any, the Administration's proposed rule has on the many lawsuits on behalf of non-profit religious organizations like Ave Maria University, Belmont Abbey College, Colorado Christian University, East Texas Baptist University, EWTN, Houston Baptist University, and Wheaton College."

CT has also reported today on how the the legal battles against HHS now may shift to questions of legal personhood: Are for-profit corporations "persons" in such a legal sense that they have religious rights? And do their religious liberties allow them to avoid the contraceptive mandate?

Update (Feb. 7): The U.S. Conference of Catholic Bishops has issued a statement against the proposed changes, stating that the action to amend the policy "shows some movement by the Administration but falls short of addressing U.S. bishops' concerns."

Editor's note: This story has been updated.

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