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Dropping public option from Obama plan cheers insurers

New York's private insurers Monday were relieved - and their Wall Street stock climbed higher - as the Obama administration signaled it may be dropping the controversial "public option" component from its proposed overhaul of the nation's health care system.

While the rest of the market plummeted, stock prices for managed care, HMO and other for-profit insurers enjoyed a noticeable rise after weeks of worrying about a government-run competitor. UnitedHealth Group shares rose nearly 1.5 percent, Aetna Inc. increased 4.7 percent, and the S&P Managed Health Care index of large health insurers also rose.

Experts say the Obama administration's talk now of health care "co-ops" - with employers pooling resources to run health care plans similar to credit unions, under government scrutiny - would still increase federal oversight over health care and possibly lower consumer costs.

But they say this still largely undefined plan probably would impact private insurers far less than other "public options" - such as a single-payer plan or a government-run insurer that some studies estimate would draw as many as 120 million people away from the managed care industry.

"They can breathe easier now that the leadership of the nation is stepping away from the public option, but they won't breathe too much easier because of this co-op plan," said Thomas Carroll, health industry expert with brokerage firm Stifel Nicolas.

"At the end of the day, government will still be a big player," he said.

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Insurers said a government-run "public option" plan as favored by Obama and many Democrats "would have ended the private health industry as we know it," said Robert Zirkelbach, spokesman for America's Health Insurance Plans, a trade group for 1,300 insurers nationwide who make up a more than $700 billion industry.

But those who favored the public option to provide health care for those without adequate coverage expressed bitter disappointment with Obama's indication that he may possibly move away from his previous support as a key element in his overhaul plan.

"This calls into question the administration's commitment to real reform and keeping insurance affordable for low- and middle-income people," said Barbara DiPietro, policy director for the National Health Care For the Homeless Council, a not-for-profit advocacy group with several affiliated clinics in the New York metro area.

Still unclear in the debate over co-ops was whether two key goals could be met: reducing long-term costs and forcing private insurers to provide broader and cheaper coverage to consumers.

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