WASHINGTON_The U.S. insurance industry Tuesday warned in stark terms that a proposed government insurance plan would dismantle the employer coverage Americans have relied on for a half century and overtake the system.

In a joint letter to senators, the two largest industry groups also said they do not believe it is possible to design a government plan that can compete fairly with private companies in a revamped health care market. That particular statement seemed to be aimed at lawmakers of both parties who are seeking a compromise on the contentious issue.

Release of the letter from America's Health Insurance Plans and the Blue Cross Blue Shield Association came as House Democrats pushed forward with a partisan health care bill. Meanwhile, key Senate Democrats were still laboring to achieve an elusive bipartisan compromise on President Barack Obama's top legislative priority of controlling costs and providing health coverage to 50 million uninsured Americans. Obama's goal for signing a bill in October appears in doubt.

He campaigned on a promise of offering affordable health care to all Americans. But the recession and a deepening budget deficit have made it difficult to win support for costly new programs. Obama says overhauling health care is vital to the United States' long-term economic recovery.

The United States is the only developed nation that does not have a comprehensive health care plan for all its citizens. The government provides health care to the poor, the elderly and some veterans , but most Americans rely on private insurance through their employers. However, not all employers provide insurance and not everyone can afford to buy it on their own.

Recent media polls have found strong public support for the idea of a government plan. It would compete with private companies to offer coverage to individuals and small businesses, but eventually might be opened to large employers as well. The positive public reaction to the idea has emboldened liberals, who are arguing that Democrats should not compromise.


The insurers suggested a government plan would run counter to Obama's promise that Americans can keep the coverage they have.

"A government-run plan no matter how it is initially structured would dismantle employer-based coverage, significantly increase costs for those who remain in private coverage, and add additional liabilities to the federal budget," said the letter from America's Health Insurance Plans chief Karen Ignagni and Scott Serota, the head of Blue Cross.

Supporters of a public plan say just the opposite would happen _ that competition would force private insurers to cut administrative overhead and profits, putting a brake on costs all around.

"We do not believe that it is possible to create a government plan that could operate on a level playing field. Regardless of how it is initially structured, a government plan would use its built-in advantages to take over the health insurance market," added the industry letter.

Instead, the insurance industry says it is ready to accept close government regulation to protect consumers. Dated June 19, the letter was addressed to Sen. Edward M. Kennedy, a Democrat.

Kennedy's committee, the Health, Education, Labor and Pensions panel, has not yet finished its design for a government plan. Bogged down in delays and partisan strife, the panel jettisoned an end-of-week deadline for passing its bill.

Deliberations on both sides of the Capitol building are continuing with lawmakers mindful of next week's July 4 congressional recess. Most will return home to face constituents with plenty of questions about their plans to overhaul the costly U.S. health care system.

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AP Special Correspondent David Espo contributed to this report.