The public option system has drawn criticism from both Democrats and Republicans, but Obama refused to say whether it was a necessary element in the legislation that he would sign.
He said it was "not logical" to think that a public option would drive the private insurance industry into the ground.
"If private insurers say that the marketplace provides the best quality health care; if they tell us that they're offering a good deal, then why is it that the government, which they say can't run anything, suddenly is going to drive them out of business? That's not logical," he said.
With the health care debate ramping up, with Republicans assailing Democrats for the high price tag and a public option plan, Obama's ratings on the subject slipped slightly in the latest ABC News/Washington Post poll.
Only 53 percent of Americans approve of Obama's handling of health care while 39 percent disapprove of it, up from 29 percent in April, according to the poll.
Obama continues to enjoy high approval ratings, but his policies may not be as popular.
While 65 percent of Americans approve of the president's job performance, less than half of those polled, 47 percent, feel the country is headed in the right direction, making it the first time since Obama's election that views of the country's course have not improved.