Health Insurers Try to Scuttle Obama Plan

May 6, 2009 -- In an effort to scuttle a major part of President Obama's plan to reform the nation's health-care system, private health insurers are taking the unusual step of asking Congress to increase regulation of their industry.

"We are not asking people to trust us," Karen Ignagni, the president of America's Health Insurance Plans, told a key congressional panel on Tuesday. "We are asking people to trust government."

The insurance industry's surprising request for more government rules and oversight is its latest attempt to convince Congress to reject a main component of Obama's health care reform plan -- a government run insurance program that would be open to all Americans under 65 and compete with private insurance plans.

The insurance industry's plea to the Senate Finance Committee came just one day before Sens. Max Baucus, D-Mont., and Chuck Grassley, R-Iowa, the panel's Democratic chairman and top Republican, were scheduled to have lunch with Obama in the president's private dining room.

To persuade members of Congress not to create the government insurance option, insurers are offering to accept a series of new consumer protections that they contend would achieve universal coverage.

The insurance industry's latest olive branch was a Tuesday offer to Sen. John Kerry, D-Mass., to end the practice of charging women more than men for the same health-care coverage. In the past, insurers have defended the practice by saying, in part, that women tend to use more health care than men during their childbearing years.

Other concessions from the insurance industry include a November offer to stop denying coverage to sick people, and a March offer to end the practice of charging higher premiums to those with a history of health problems.

"I know you guys are skeptical, I read it on your faces," Ignagni told reporters following the hearing. "This is truly what it is: It is a transparent call for a full-scale renovation and a complete overhaul of the existing regulatory mechanisms."

Republicans and at least three of the 13 Democrats on the committee -- Delaware Sen. Tom Carper, Oregon Sen. Ron Wyden, and Arkansas Sen. Blanche Lincoln -- seemed receptive, or at least open, to the insurance industry's argument that the U.S. should not create a public plan to compete with private insurers.

"I have thought a lot about the role of government. The role of government is to steer the boat, not to row the boat," said Carper.

Most Democrats, however, remained skeptical about the insurance industry's offer.

"Trusting insurance companies in a regulated market is not something I think the American people are ready to do," Andy Stern, the president of the Service Employees International Union, told ABC News.

During the 2008 campaign, Obama joined his leading Democratic rivals in calling for the creation of a government insurance option. He continues to support some kind of public plan while also promising to address the concern that a government plan would have an unfair advantage over private insurance.

In an effort to find a compromise on an issue which has become a key sticking point in the debate over health-care reform, Baucus asked Sen. Chuck Schumer, D-N.Y., to develop a plan, which he presented Tuesday, that would require any new government-run insurance program to comply with all the rules that apply to private insurance.

"Just as bad as a public plan with an unfair advantage, is no public plan at all," said Schumer. "The American people have some problems with the government. But they have a lot more problems with private insurers."

The insurance industry quickly challenged Schumer's proposal during Tuesday's hearing, saying government can never compete fairly with private industry.

Schumer was unmoved by the criticism.

"In my view," said Schumer while looking in the direction of the insurance industry representatives, "it may even be a little self interested."

ABC News' Brian Hartman and Sunlen Miller contributed to this report.