(Updates with reaction, lawsuit by St. Louis businessman)

By Kevin Murphy

KANSAS CITY, Mo., July 12 (Reuters) - Missouri's Democratic Governor Jay Nixon on Thursday vetoed a bill that could have resulted in women being denied insurance coverage for contraception, in the latest battle over Catholic Church objections to providing birth control coverage as part of the new health care law.

Republican lawmakers in Missouri drafted the law in response to President Barack Obama's policy of requiring insurers to cover birth control for free as part of the new federal health care law, even if they work for a church or other employer that has a moral objection.

Catholic bishops, backed by many Republicans, have campaigned against the requirement, saying it is an unfair government intrusion on religious freedom. The Catholic Church's formal position is to oppose contraception, although most Catholic women do not follow church doctrine.

The conservative American Center for Law and Justice has filed a federal lawsuit on behalf of a St. Louis business owner who protests that the Obama administration rule violates his religious beliefs. Frank O'Brien, a devout Catholic who owns an industrial holdings company that processes ceramics, wants to deny his employees birth control coverage but says that the federal regulation prevents him from following his conscience.

The National Council of State Legislatures, which tracks state law changes, said it was not aware of any other state attempting to pass a law like the one vetoed in Missouri.

In vetoing the bill, Nixon noted that state law already allows employers or workers to opt out of contraceptive coverage based on moral or religious beliefs. But the proposed law would have enabled insurance companies to deny coverage even if the employer and employee wanted it, Nixon said.

"By doing so, the bill would shift authority to make decisions about access to contraceptive coverage away from Missouri women, families and employers - and put that power in the hands of insurance companies," Nixon said.

He said this would set a dangerous precedent for the future.

The Republican-dominated Missouri House and Senate could try to override Nixon's veto in September when the Missouri lawmakers hold their veto session. The bill passed overwhelmingly in the legislature.

Nixon's decision won immediate praise from Peter Brownlie, president of Planned Parenthood of Kansas and Mid-Missouri, which supports the right to abortion.

"We're pleased that he took a courageous stand," Brownlie said. "He knows and everyone knows there will be a strong effort in the House and Senate to override the veto."

Nixon's likely Republican opponent in the fall election, Dave Spence, criticized Nixon on his campaign website Thursday.

"Jay Nixon chose to stand with President Obama and radical pro-choice advocates instead of the overwhelming number of Missourians who do not want Obamacare, who do not want our religious liberties infringed upon," Spence said.

The Missouri Catholic Conference on Thursday urged people of faith to contact legislators to urge them to overturn the governor's veto (Additional reporting by Stephanie Simon in Denver; Editing by Greg McCune, Todd Eastham and Lisa Shumaker)

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