Substantively, both sides of this controversy ought to take some satisfaction from the outcome. From the Church’s point of view, Obama has allayed its concerns that its allied organizations would be required to cover contraception, in violation of the Church’s teachings. Yet those who worried that employees of Catholic hospitals, universities and social service agencies would not be able to access contraception coverage should be happy, too.

Following but tweaking a model pioneered by Hawaii, the administration lifted the requirement that objecting religious organizations had to pay for contraception themselves. The health care policies they issue will not have to include contraception. Moreover, responding to another Catholic concern, they will also be under no obligation to inform their employees that they can receive contraception coverage in other ways or refer them to such coverage.

Instead, the requirement to inform will rest with the insurance companies who will be required to provide such coverage free of charge if individual employees ask for it. Since contraception coverage in effect saves insurance companies money (covering contraception is cheaper than covering pregnancy and child birth), the insurance companies will be required to offer this coverage free of charge. Under Obama’s proposal, responsibility for asking for contraception coverage falls to individuals.

The most important Catholic service providers quickly welcomed Obama’s move. “We are pleased and grateful that the religious liberty and conscience protection needs of so many ministries that serve our country were appreciated enough that an early resolution of this issue was accomplished,” the Catholic Health Association said in a statement issued after Obama’s announcement.

Obama’s decision was a vindication for Sister Carol Keehan, the president of the CHA who had been courageous in breaking with the Catholic Bishops’ conference in 2010 in endorsing the president’s health care initiative. Among the many problems with the administration’s initial refusal to grant Catholic groups brosder relief from regulation was the lack of respect this move showed for Keehan. She had been led to believe that the administration was working toward the compromise it finally announced yesterday.

Catholic Charities USA also spoke favorably of Obama’s decision: “Catholic Charities USA welcomes the Administration’s attempt to meet the concerns of the religious community and we look forward to reviewing the final language,” the group said. “We are hopeful that this is a step in the right direction and are committed to continuing our work to ensure that our religious institutions will continue to be granted the freedom to remain faithful to our beliefs, while also being committed to providing access to quality healthcare for our 70,000 employees and their families across the country.”

Some conservative Catholics were claiming even before the announcement that Obama’s move was insufficient, and they appeared to be moving the goal posts in the argument by demanding that the exemption be extended to any employers with a religious objection to contraception coverage. But there was also sentiment among Bishops that they should be prepared to declare victory and move on.

It should be said that a compromise along the lines outlined today had been suggested months ago by Melissa Rogers, the former chairman of the White House Council on Faith-Based and neighborhood Partnerships. I will have more to say on this later today, and also in my column on Monday. The administration will have to think hard about how and why it mishandled the issue and courted a controversy it could have avoided.  I would have preferred it if Obama had offered at least some acknowledgement of this. 

Nonetheless, Obama’s move is a welcome step away from a religious battle that neither he nor the country needed. There were legitimate liberty interests on both sides of this debate, as he said today.  The administration’s new rule, unlike its initial decision, honors that fact. It is an important step.

POSTSCRIPT 10:45 PM: Beyond the responses from Catholic provider groups, the most important response to Obama’s decision today came from Archbishop and Cardinal-designate Timothy Dolan, the president of the U.S. Conference of Catholic Bishops. It was guarded, but more positive than the reaction of more conservative Bishops - and of conservative and Republican activists.

“While there may be an openness to respond to some of our concerns, we reserve judgment on the details until we have them,” Archbishop Dolan said. “The past three weeks have witnessed a remarkable unity of Americans from all religions or none at all worried about the erosion of religious freedom and governmental intrusion into issues of faith and morals.”

“Today’s decision to revise how individuals obtain services that are morally objectionable to religious entities and people of faith is a first step in the right direction,” Cardinal-designate Dolan said. “We hope to work with the Administration to guarantee that Americans’ consciences and our religious freedom are not harmed by these regulations.”

To have Dolan praise the decision as “a first step in the right direction” seemed a major development, given that Dolan had good reason to feel misled by reassurances he had received from the White House before the administration issued its earlier rule that caused such intense opposition from the church.

But this evening, a lengthy statement appeared on the Bishops Conference website that seemed to promise continued opposition to the Administration. After raising a series of specific questions about the impact of the new rules, the statement said: “But stepping away from the particulars, we note that today’s proposal continues to involve needless government intrusion in the internal governance of religious institutions, and to threaten government coercion of religious people and groups to violate their most deeply held convictions.”

Obama’s concession that there is a religious liberty issue at stake on contraception has, to a large degree, restored the alignment of forces in the Church that existed during the 2010 battle over the health care law. Catholic suppporters of the health care law, including more liberal Catholics and groups such as the Catholic Health Association, were broadly satisfied with this resolution. But conservatives who opposed the health care bill are inclined to continue to press their opposition to the contraception rules, even as rewritten.

One mystery about the late-night statement from the Bishop’s Conference is that it not carry Archbishop Dolan’s name — or any other — so it was hard to judge its status. My sense is that there is division among the Bishops, and some awareness, as Father Tom Reese of the Woodstock Center noted, that while the cause of religious liberty is broadly unifying, both inside the Catholic Church and beyond, opposition to contraception is not. Dolan, for his part, has not gone out of his way to seek out conflict with the Obama Administration.

The president’s statement today clearly put him in a stronger position. It also scrambled the politics inside the Catholic Church.