WASHINGTON -- The insurance industry Tuesday laid down a marker on health care, warning 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 don't believe it's 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. 

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 shouldn't 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 AHIP 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 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, D-Mass. 

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 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 nation's costly health care system. 

A sweeping bill unveiled in the Democratic-controlled House last week is being weighed in hearings that got under way Tuesday. The draft legislation, written without Republican help, would require all Americans to purchase health insurance and would put new requirements on employers, too. 

Obama's goal for signing a bill in October appears in doubt. 

But Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee, is doggedly pursuing a compromise. "We will get a bipartisan agreement," he insisted Monday. 

Of the five House and Senate committees working on health care, Finance is the only one that appears to have a chance at a bipartisan agreement. Baucus planned to huddle behind closed doors Tuesday with a group of senators he's dubbed the "coalition of the willing." Others involved are top committee Republican Charles Grassley of Iowa; Republicans Mike Enzi of Wyoming, Orrin Hatch of Utah and Olympia Snowe of Maine; and Democrats Kent Conrad of North Dakota and Jeff Bingaman of New Mexico. 

Looming large is the question of cost. Initial estimates had Senate plans topping $1.6 trillion over 10 years, and senators are working to scale back. Curbs on Medicare and Medicaid spending are assured, and a range of taxes are under consideration, along with the possibility of fees on employers who don't cover their employees. 

The Senate's health committee is waiting for revenue estimates from the Congressional Budget Office on three scenarios for employer requirements, according to Sen. Chris Dodd, D-Conn., who's leading the committee during Sen. Edward M. Kennedy's treatment for brain cancer. They are a requirement that employers provide health coverage for employees or pay a fee; an approach requiring employers to chip in to the federal treasury for employees who are covered under public plans; and a scenario where employers who don't cover their employees would pay the government a set amount per employee.