Obama on Friday made insurers responsible for providing free birth control to employees of religious groups, aiming to placate outraged leaders of the Catholic church who oppose contraception and to defuse an election-year landmine.

Free birth control is mandated under Obama's 2010 healthcare law. The administration has exempted houses of worship from the rule, but requires the coverage be made available to employees of religiously affiliated organizations such as hospitals and universities.

Providing free birth control is not expected to hurt profits for the multibillion dollar insurance industry. But insurance companies questioned the principle of making them pay for coverage with no clear way to recoup the expense.

"We are concerned about the precedent this proposed rule would set," said Robert Zirkelbach, spokesman for America's Health Insurance Plans, the industry's trade group. "As we learn more about how this rule would be operationalized, we will provide comments through the regulatory process."

Zirkelbach said insurers "have long offered contraceptive coverage to employers as part of comprehensive, preventive benefits that aim to improve patient health and reduce health care cost growth."

Employers who have signed on for such health plans in the past paid part of the cost of birth control prescriptions, while their employees also bore some expense through co-payments.

An Obama administration official said the new policy would not allow health insurers to increase their premiums, charge co-payments or deductibles to make up for the cost of contraceptives.

The National Organization of Women estimates that nearly 3 million employees of religious groups and their dependents are affected by the birth control policy. U.S. Catholic institutions like colleges and hospitals are estimated to employ over 630,000 people.

PRIME TARGET

Health insurers were a prime political target of the Obama administration as it sought to rally momentum behind the healthcare law, which aims to extend affordable insurance coverage to millions more Americans.

The law has added oversight of the industry's premium rate increases and forced insurers to pay the lion's share of their premium revenue on medical care rather than administrative costs. It also prohibits insurers from turning away patients with pre-existing conditions.

In the case of the new requirement on free birth control, insurers may still seek less obvious ways to pass it through, either to the same employers or other corporate clients.

Thomas Carroll, an analyst who covers health insurance companies for Stifel Nicolaus, said that, "in the grand scheme of things, it doesn't seem like a material cost to be added to the managed care company or the employer."

"Any services that are mandated are ultimately covered in the premium, either to the specific group or to the system in general," Carroll said.

Aetna, the third-largest U.S. health insurer, said it would comply with the policy, but needed, "to study the mechanics of this unprecedented decision before we can understand how it will be implemented and how it will impact our customers."

An Aetna spokeswoman said the company, "did not have any direct input into the actual policy decisions that were made."

The administration says insurers should ultimately make up any initial costs by avoiding expenses associated with unintended pregnancies.

That view was echoed by Wendell Potter, former top spokesman for insurer Cigna Corp who is now an industry critic.

"Providing contraception, even for free, is cost-effective for insurers so I don't think they'll balk," he said, adding it could even save them money in the long run.

"It may add a little administrative complexity to what they do, but they can deal with it."

(Additional reporting by David Morgan and Caren Bohan in Washington and Sharon Begley in New York; editing by Michele Gershberg, John Wallace, Matthew Lewis editing by Andre Grenon)

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