As the House and Senate begin work to merge their respective health reform bills into one comprehensive piece of legislation, one early victim of compromise may be a government-run health insurance program.

In its bill, passed last November, the House included language to create the public option as a tool to compete with private insurers, as well as the creation of health insurance exchanges, online marketplaces for individuals and small businesses to shop for coverage.

The Senate, in its bill, bypassed the public option in favor of expanding Medicare to secure the necessary votes to ensures the legislation’s approval.

Several media reports indicate that House Democrats, including House Speaker Nancy Pelosi of California, are ready to abandon the public option, but want more tools to keep private insurers in check.

One such mechanism would be removing the federal antitrust exemption for health and medical malpractice insurers granted under the 1945 McCarran-Ferguson Act, a feature of the House health reform bill, but not the Senate bill.

House Democrats are also pushing for a national health insurance exchange overseen by the federal government and not the exchange system in the Senate bill, which features a state-by-state exchange system, according to published reports.

In his weekly address, President Barack Obama again noted that the nation is “on the verge of passing health insurance reform that will finally offer Americans the security of knowing they’ll have quality, affordable health care whether they lose their job, change jobs, move, or get sick.

“The worst practices of the insurance industry will be banned forever,” he said. “And costs will finally come down for families, businesses, and our government.”

Obama continued on highlighting several features of a bill he would sign to achieve such reform, mentioning the end of pre-existing condition denials, tax credits for small businesses to cover employees, and closing the Medicare “doughnut hole” for seniors.

The president also noted that insurance plans will be required to offer free preventative care to customers an no longer will be able to impose “restrictive annual limits” on coverage or lifetime benefits.

Obama did not note, however, a public option or a health insurance exchange as key features of a bill that would receive his signature as law.

Public option’s demise noted before

This is not the first time since the Dec. 24, 2009, passage of the Senate bill that House Democrats have wavered on the public option.

James E. Clyburn

House Majority Whip James E. Clyburn (D-S.C.) told CBS’ Face the Nation four days after the Senate measure was approved that the public option is not set in stone.

“We want a public option to do basically three things: create more choice for insurers, create more competition for insurance companies and to contain costs,” Clyburn said. “So if we can come up with a process by which these three things can be done, then I’m all for it. Whether or not we label it a public option or not is of no consequence.”

On the same day Clyburn made his comments, Rep. Chris Van Hollen (D-Md.) told Fox News Sunday the public option was “not dead,” but acknowledged that the Senate struggled to secure 60 votes to pass its measure.

“Before the House was to give up the public option, we would want to be persuaded that there are other mechanisms in whatever bill comes out that will keep down premiums,” Van Hollen said. “We’ve got to make sure that the final product is affordable. We’re asking everybody to have health insurance. It’s got to be affordable.”