Lindsey Beyerstein sums up the issues well:
The Obama administration has rebuffed the U.S. Conference of Catholic Bishops and other religious lobby groups seeking greater leeway for religiously-affiliated insurers to deny birth control coverage.Lindsey also points out that the fight is nowhere near over.
The existing exemption for churches will stand, but the feds will not expand the exemption to cover church-affilitated schools, hospitals, or universities.
As I have written before, it makes little sense to define religious rights based on how someone with a certain religion may treat those of other religions or no religion at all, and that's what the U.S. Conference of Catholic Bishops essentially demands when it wants to have a say over what the employees of Catholic schools, hospitals or universities get in their coverage.
A much more logical way of doing this would be for the Conference of Catholic Bishops to demand that no person who has put her or his religion down as Catholic can qualify for contraceptive coverage, irrespective of their employer's religious views. I'm not supporting that reading at all. Just pointing out that if we base all this on religious affiliation, it should be the religious affiliation of the insured person which matters.