(Reuters) - The Obama administration has been quietly negotiating with representatives of the Conference of Catholic Bishops to tamp down their furious opposition to a federal mandate that insurance companies cover birth control, according to sources familiar with the talks.

Both sides have indicated that they hope to continue the negotiations, despite scant progress so far.

One of the biggest stumbling blocks is a terse definition - of what constitutes a religious institution - far removed from the emotional flash points of contraception and abortion that have dominated the often-fiery public debate. Yet the bishops see it as a crucial issue.

The language at issue exempts religious institutions from the insurance mandate only if they primarily employ and serve people of their own faith - and only if their main purpose is to inculcate religious values. This definition covers most houses of worship but not the vast network of faith-based organizations serving a broad public, such as hospitals, colleges, orphanages and homeless shelters.

President Barack Obama last month sought to accommodate those organizations by promising that they would not have to pay for their employees' birth control; their insurers would. But his administration, keen to extend free contraception to as many women as possible, refused to exempt those institutions outright.

About 40 of the nation's most influential bishops have been meeting this week in Washington, in part to map out strategy.

Government has no place defining religion and religious ministry, they said in a statement Wednesday.

They vowed to continue their fight against the contraceptive mandate - and especially against the definition of religious institutions, which they called unwarranted, unprecedented and arbitrarily narrow.

If this definition is allowed to stand, the bishops said, it will spread throughout federal law, weakening its healthy tradition of generous respect for religious freedom and diversity.

The bishops say the president has arrogantly taken it upon himself to judge which groups are truly religious, or at least religious enough to qualify for an exemption. They call the president's definition so cramped, not even Jesus' ministry would qualify.

PRECEDENT-SETTING?

And they worry that this narrow approach will creep into other federal regulations, creating a perception that faith-based groups aren't legitimate religious institutions.

That definition, if it becomes a template for religious regulation generally, is very dangerous, said Richard Garnett, a law professor at the University of Notre Dame who is advising the bishops.

White House officials said the definition of religious institutions is not intended to set a precedent.

U.S. courts generally use a broader lens to determine whether an organization qualifies as religious. Among the key points that judges consider: Whether the group is church-owned or affiliated; whether it holds itself out to the public as religious; and whether it clearly states a religious purpose for its work.

If an organization is deemed religious in nature, it may be exempted from certain civil-rights and non-discrimination statutes. For instance, the group might be free to hire and fire employees based on their religious fidelity, something a secular organization cannot do. Bishops fear that the contraceptive regulation could set a legal precedent that only churches deserve those exemptions.

Even the most liberal of American bishops remain concerned about the precedent, said Stephen Schneck, a political scientist at the Catholic University of America. If same-sex marriage becomes the law of the land, would Catholic college chapels be required now to provide weddings to same-sex couples? If euthanasia is protected by law, would Catholic hospitals be forced to accommodate it?

The definition debate has sharpened in recent days.

In a four-page letter to the White House sent last Friday, Paul Corts, president of the Council for Christian Colleges & Universities, urged Obama to write new regulations or - at the very least - to put out a statement affirming that faith-based organizations are just as religious and just as committed to their religious principles as bona fide churches.

He said the current framework creates a two-tier system that relegates faith-based colleges and social service agencies to second-class citizenship.

A former adviser to the president on faith-based issues, Melissa Rogers, also called for a reworked definition and an expanded exemption. As written, it makes no sense, said Rogers, director of the Center for Religion and Public Affairs at Wake Forest University.

White House officials declined further comment on negotiations with religious leaders, beyond saying that they welcome all input on implementing the regulation with respect for religious liberty.

(Reporting by Stephanie Simon in Denver; Editing by Marilyn W. Thompson and Cynthia Osterman)

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