WASHINGTON_The insurance lobby won't be able to block a public health plan because most Americans realize they would be better off if the industry had competition, Health and Human Services Secretary Kathleen Sebelius said Tuesday as congressional committees worked to shape legislation.

In an interview with The Associated Press, Sebelius said that President Barack Obama does not want to drive health insurers out of business, but make them more competitive by offering working families and small businesses the option of a public plan without the high overhead costs of marketing, administration and profits.

"I think there is a lot of understanding that the private market has really failed to provide affordable coverage to Americans," Sebelius said. The industry has had "a lot of opportunities" to get rid of coverage restrictions and other unpopular policies, Sebelius said, and really "hasn't served Americans very well."

However, Sebelius stressed that Obama is open to compromise on the shape of the public plan, which doesn't have to be run by the government. She spoke positively of a compromise idea that envisions consumer-owned nonprofit cooperatives, like rural electricity or agriculture co-ops. They would get started with seed money from taxpayers but then compete without government control. The plan by Sen. Kent Conrad, D-N.D., may end up in a health overhaul bill to be unveiled by the Senate Finance Committee this week.

In the end, the insurance industry will blink first in any showdown over a public plan, Sebelius predicted.

"I think they understand there's a lot of momentum both in the House and in the Senate for something to pass, and they'd much rather be inside the room, having those discussions, and helping to shape it as much to their liking as they possibly can," she said.

Sebelius, the former Kansas governor and insurance commissioner, is taking on an increasingly upfront role as a spokeswoman for Obama's effort to overhaul the health care system to provide coverage for nearly 50 million uninsured and restrain costs.

The massive department she heads is working on plans to expand coverage by signing up more people who are eligible for existing government programs such as Medicaid and children's health insurance.



In the interview, Sebelius also said that covering the uninsured could take years, even if Congress passes a bill and Obama signs it into law this fall.

Stretching out the phase-in period could make it easier to handle the costs of the bill, estimated at $1 trillion over 10 years at least, a sum that already is prompting second thoughts from some key lawmakers.

The idea of a public plan has drawn sharp opposition from the insurance industry, which sees it as a step toward a government-run system like in Canada or the United Kingdom. Business groups, doctors and hospitals also have concerns. Republicans have made the issue the cornerstone of their opposition to Obama's health care push. And while liberals enthusiastically support a government plan, conservative Democrats are leery.

Sebelius said that Obama is not trying to run insurers out of town.

The notion that a public option "is really the stalking horse" for a government-run system "is not accurate," Sebelius said.

A public plan would be offered along with private ones through a new kind of insurance purchasing pool, called an "exchange." The exchanges would be open to individuals and small businesses, and maybe even some large companies. Sebelius said a public plan would provide a standard for affordable coverage against which private insurance can be measured, especially in underserved areas of the country.

An insurance industry spokesman said a government-sponsored plan would have "significant unintended consequences," prompting employers to drop private coverage for lower premiums in public plans that the companies can't hope to match.

"A better approach is to completely overhaul existing market rules and enact new consumer protections to guarantee coverage for pre-existing conditions and ensure that nobody falls through the cracks," said Robert Zirkelbach, a spokesman for America's Health Insurance Plans.

But White House senior adviser David Axelrod said Obama is not likely to budge on his demand for a public insurance option. Axelrod said Obama isn't wedded to the public plan being either entirely funded or run by the government and is open to "variations on the theme."