Catholic bishops are doubling down in their opposition to the Obama administration mandate that church-sponsored institutions provide employees health plans that include contraception.

The issue is not women’s reproductive rights, but rather the right of faith-based institutions to continue in their historically established roles serving American society.

The First Amendment prohibition of laws “impeding the free exercise of religion” was written in an age of very limited government. Prior to the New Deal, Washington left the aid to the homeless and poor, health care and other social services largely to the states and private sector. With little or no public funding, churches and other private charities established schools and universities, social service agencies, and hospitals to help educate the young and aid the sick and poor.

Before Medicaid was established in 1965 and the federal government began supporting Planned Parenthood in 1970, no one gave much thought as to whether church-sponsored institutions should be required to provide birth control services, or pay for those for their employees. However, now that the government has chosen to provide health insurance to all Americans, directly or through private mandates, the issue is cast through a wholly different prism.

As federally mandated health plans must pay for sterilization and contraception—including abortifacient drugs—those mandates will require Catholic Church-sponsored hospitals, universities and social service agencies to act against Church teachings.

In deference to the First Amendment, Health and Human Services will exempt religious employers who only hire and serve primarily those of their own faith, but that is too narrow—effectively, it only exempts houses of worship.

To comply with its own teachings, the Catholic Church would be compelled to either limit the faculty and student body to substantially only Catholics at Notre Dame University, and thousands of schools and other universities, or shut their doors. The same applies to employees and clients at hospitals and social service agencies.

This would effectively limit the Church’s role in America to one similar to the one it had in Eastern Europe during the Soviet era. Churches stayed in business but were isolated places. Citizens could visit houses of worship, but the Church could not effectively reach out to the sick, homeless and poor, and participate in education. Its humanitarian role—which is as much an expression of faith as the Mass—was almost totally usurped by the state.

HHS has offered Catholic bishops a compromise—it would require insurance companies to offer contraceptives through health plans at Catholic hospitals and similar institutions, but not permit those companies to charge for contraceptives in premiums.

That is an economic and theological fantasy—someone has to pay for birth control services and those costs would simply be disguised and passed on to Church-sponsored institutions anyway.

Those institutions still would be compelled to pay for something the Church teaches is morally wrong—by any reasonable reading that violates the “free exercise of religion.”

Since Franklin Roosevelt, Americans have increasingly gravitated to a welfare state that guarantees income security, cradle to grave health care, access to higher education and the like, but those are not free—increasingly those guarantees come at the expense of free speech, religion and other constitutional protections.

For example, virtually every college and university receives some federal and state dollars, and young people must attend one of those to get a college degree. Yet religious organizations are increasingly circumscribed in what they must tolerate to gain access to campus facilities and service students.

A Supreme Court decision recently upheld a state-sponsored law school’s decision to deny a Christian group funding and recognition, because it did not permit gay students to join. Students pay taxes and compulsory fees to fund campus organizations and facilities—gay rights organizations are free to get that funding and access, why not religious groups that believe their lifestyle is wrong as long as they pose no threat to others?

It all becomes not a question of the free practice of religion, but whose religion we are free to practice.

Peter Morici is an economist and professor of business at the University of Maryland and a national columnist. Follow him onTwitter @pmorici1.

Peter Morici served as Chief Economist at the U.S. International Trade Commission from 1993 to 1995. He is an economist and professor at the Smith School of Business, University of Maryland, and a widely published columnist. He is the five time winner of the MarketWatch best forecaster award. Follow him on Twitter @PMorici1.