It'll be interesting to see if this makes it to the Supreme Court. Otherwise, I think Catholic Charities should close its doors rather than comply. Morally, I think it would have to. Plus, it would pressure the government that really does count on the services of religious non-profits. They need to throw their weight for all it's worth.
http://www.chron.com/disp/story.mpl/ap/nation/4273949.html