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UPDATE 3-Trump undermines U.S. birth control coverage requirement

(Adds congressional reaction, predictions on companies seeking exemptions, previous Trump comments and his actions toward transgender people)

WASHINGTON/NEW YORK, Oct 6 (Reuters) - President Donald Trump's administration on Friday undermined requirements under the Obamacare law that employers provide insurance to cover women's birth control, keeping a campaign pledge that pleased his conservative Christian supporters.

Administration officials said effective immediately two new federal rules will let any non-profit or for-profit entity make religious or moral objections to obtain an exemption from the law's contraception mandate. The changes also let publicly traded companies obtain a religious exemption.

It was not clear how many employers would actually drop birth control coverage on religious grounds. The move drew praise from conservative Christian activists and congressional Republicans. It was criticized by reproductive rights advocates and Democrats. Some states and groups including the American Civil Liberties Union vowed to sue to block the move.

"This is a landmark day for religious liberty. Under the Obama administration, this constitutional right was seriously eroded," Republican House of Representatives Speaker Paul Ryan said.

"This administration's contempt for women reaches a new low with this appalling decision," top House Democrat Nancy Pelosi said.

Trump, who criticized the birth control mandate in last year's election campaign, won strong support from conservative Christian voters. The Republican president signed an executive order in May asking for rules that would allow faith-based groups to deny their employees insurance coverage for services they oppose on religious grounds.

"We will not allow people of faith to be targeted, bullied or silenced anymore," Trump said at the time.

The contraception mandate was one provision of the 2010 Affordable Care Act, Democratic former President Barack Obama's signature legislative achievement. Trump and Republicans in Congress campaigned against Obamacare, as the law is known, but could not get enough votes to repeal it as they promised.

"The Trump administration just took direct aim at birth control coverage for 62 million women," Planned Parenthood Federation of America President Cecile Richards said in a statement.

"With this rule in place, any employer could decide that their employees no longer have health insurance coverage for birth control," Richards added.

The U.S. Department of Health and Human Services broadened narrow religious exemptions to include an exception "on the basis of moral conviction" for non-profit and for-profit companies.

Federal rules implemented under Obamacare required employers to provide health insurance that covers birth control, but religious houses of worship were exempted. Some private businesses sued regarding their rights to circumvent such coverage, and the Supreme Court ruled in 2014 that they could object on religious grounds.

'ALIENATING POTENTIAL SHAREHOLDERS'

Case Western Reserve University School of Law professor Jonathan Adler said it was unlikely publicly traded companies would seek exemptions. "Why would a publicly traded company risk alienating potential shareholders by taking such a step?" Adler said.

According to one estimate, only 3 percent of nonprofit groups offering health benefits have objected to contraceptives coverage.

"All Americans should have the freedom to peacefully live and work consistent with their faith without fear of government punishment," the conservative Christian legal activist group Alliance Defending Freedom said in a statement praising the administration's action.

"HHS has issued a balanced rule that respects all sides - it keeps the contraceptive mandate in place for most employers and now provides a religious exemption," said Mark Rienzi, one of the lawyers for the Little Sisters of the Poor. The order of Roman Catholic nuns, which runs care homes for the elderly, had challenged the mandate in court.

The Little Sisters and other Christian nonprofit employers objected to a 2013 compromise offered by the Obama administration that allowed entities opposed to providing contraception insurance coverage to comply with the law without actually paying for the required coverage.

California Attorney General Xavier Becerra said he was "prepared to take whatever action it takes" to defend the mandate that health insurers provide birth control.

The Justice Department released two memos that will serve as the government's legal basis for justifying the rule and laying out a framework for how apply religious liberty issues in legal opinions, federal rules and grant making.

One memo instructs Justice Department employees to incorporate its legal arguments on religious freedom into litigation strategies and how they review rules. A second memo used a similar directive to government agencies to be used in the course of "employment, contracting and programming."

In another decision popular with Trump's evangelical supporters, the Justice Department on Wednesday reversed federal policy and declared that federal law banning sex discrimination in the workplace does not protect transgender employees. Trump also has removed protections for transgender students and moved to ban transgender people from the military.

Trump's support among evangelical voters, a major force in his 2016 election victory, remains strong, but has been slipping in line with his overall approval ratings, according to recent Reuters/Ipsos poll results. (Reporting by Sarah N. Lynch in Washington and Caroline Humer in New York; Additional reporting by Lawrence Hurley and Lisa Lambert in Washington, Julie Steenhuysen in Chicago and Dan Levine in San Francisco; Writing by Will Dunham; Editing by David Gregorio)