U.S. health officials, implementing a controversial health care law, are proposing to accommodate the desire by some religious non-profit organizations to refuse to provide insurance coverage for contraceptives on religious grounds.

The move stops short of addressing a wider request by businesses also opposed to providing the coverage.

The administration of President Barack Obama on Friday unveiled proposed rules that transfer responsibility for payment from the non-profit institution to their insurer, or a third party administrator that provides a separate insurance plan to an employee without the need for the non-profit institution to pay.

The proposed rules are open to public comment through April 8, 2013.

The proposed rule implements legislation signed into law in 2010 which has faced dozens of legal challenges. Numerous cases involving Catholic universities and hospitals and one involving business whose Christian owners object to the mandate are winding their way through the U.S. court system.

The 2010 law known as the Affordable Care Act currently has in place an exemption for "religious employers" which includes churches, other houses of worship and their affiliated organizations.

The rule proposes "contraceptive coverage with no cost sharing" which would provide women with coverage for contraceptive services while also respecting the concerns of some religious organizations.

Kathleen Sebelius, the Health and Human Services Secretary said the move is the Obama administration's "next step in providing women across the nation with coverage recommended preventive care at no cost, while respecting religious concerns."

Cardinal Timothy Dolan of New York, president of the United States Conference of Catholic Bishops issued a response indicating more time was needed to evaluate the proposal.

"We welcome the opportunity to study the proposed regulations closely. We look forward to issuing a more detailed statement later," he said.

The USCCB had previously argued that the previous exemption covering churches and other houses of worship was so narrow it excluded most Catholic social service agencies and healthcare providers.

The proposed rule does not deal with businesses whose owners have a moral objection to providing the coverage. One high profile example is the Oklahoma City-based Hobby Lobby chain store, which is challenging the law in court.

Kyle Duncan, an attorney representing the company in the case in federal court said in a Saturday report by Tulsa World that the Hobby Lobby is "extremely disappointed" with the announcement. He says that while the company does not object to many forms of contraception, it is opposed to some methods included in the government mandate, which it says amounts to chemical abortions.

"We remain committed to protecting religious liberty until the administration recognizes conscience rights of all Americans," he said.

Proposed rule transfers cost to insurers

Under the proposed rule, non-profit religious organizations, including hospitals or universities that object to contraception on religious grounds "can receive an accommodation that provides their enrollees separate contraceptive coverage, and with no co-pays, but at no cost to the religious organization."

In the case of insured health plans, including student health plans, religious organizations would need to notify their insurer. The insurer would then notify enrollees that it is providing them with the contraception services at no cost through separate health insurance policies.

In the case of self-insured plans, as well as student health plans, the religious organizations would notify a "third party administrator." That administrator would work with an insurer to arrange "no-cost contraceptive coverage through separate individual health insurance policies."

The rules lay out how the insurer or third party administrator would cover their costs without a charge to the religious organization or the enrollees, the health department said.