So, in the ginned up controversy over the requirement that religious non-profits cover contraception for their employees, Obama has split the baby:

Mr. Obama announced that rather than requiring religiously affiliated charities and universities to pay for contraceptives for their employees, the cost would be shifted to health insurance companies. The initial rule caused a political uproar among some Catholics and others who portrayed it as an attack on religious freedom.

Meeting with his top advisers in the Oval Office last week amid rising anger from Catholic Democrats, liberal columnists and left-leaning religious leaders — a fed-up Mr. Obama issued an order meant for Kathleen Sebelius, the secretary of health and human services. Ms. Sebelius and agency lawyers had initially told the president they needed a year to work out a compromise that had seemed obvious to some in the administration from the start: make the new rule more like that offered by the State of Hawaii, where employees of religiously affiliated institutions obtained contraceptives through a side benefit offered by insurance companies.

But in difficult internal negotiations, a group of advisers had bested Vice President Joseph R. Biden Jr. and others and sold the president on a stricter rule. Now the political furor surrounding it was threatening to consume signs of economic improvement giving a boost to the White House and put the Obama re-election campaign on the defensive.

So the mandate for coverage is now on insurance companies, rather than the employers.

If this is the end of this matter, then this is a good thing.

My concern, based on past history, is that this is only the first step in a larger retreat.

Then again, there are a number of people I respect who see it as eleventy dimensional chess, with people like Amanda Marcotte suggesting that Obama punked both the Conference of Bishops and the woman hating wing of the Republican Party, by forcing them to publicly oppose contraception, which is used by something like 99% of all sexually active women in the US at one time or another.

Certainly the optics, for now at least, are good, and the effect on coverage of this change is zero, so it’s a win win.

But the most powerful knock against Obama is his unwillingness to fight, and in the 2-3 days before this decision, news outlets were starting to note that there are 28 states that have had an identical mandate, and have had such a mandate for years, with nary a peep from the pedophile protection bureau US Conference of Catholic Bishops, so it was clear that the worm was turning in the media as well, so keeping this up until they blinked would, to my mind, have been the optimal approach.

[on edit]
I think that the real policy and political implications are best synthesized by the following from Lindsay Beyerstein:

But if the bishops won’t accept this deal, Obama should stop trying to accomodate them. Respect for religious freedom does not include paying solemn lip service to the contraception cooties.