The Senate healthcare bill will include a compromise public option that
allows states to opt out of a government insurance program.

At a press conference, Senate Majority Leader Harry Reid (D-Nev.) said he’d concluded “the best way to move forward is to include a public option with the opt-out provision for states.”

{mosads}“A public option can achieve the goal of bringing meaningful reform to our broken system and will protect consumers, keep insurers honest and ensure competition, and that’s why we intend to include it in the bill that will be submitted to the Senate,” Reid said Monday.

“While a public option is not a silver bullet, I believe it is an important way to ensure competition and level the playing field for patients with the insurance industry.”

Democrats have been deeply divided over the public option, with liberals insisting it was needed to ensure competition in health insurance. Republicans have united against it, arguing it will add to the cost of healthcare and drive private insurers out of business.

Reid’s decision could cost him the support of Sen. Olympia Snowe (Maine), the only Republican to support a healthcare bill in Congress this year.

“I am deeply disappointed with the majority leader’s decision to include a public option as the focus of the legislation,” Snowe said in a statement.

Reid, who said he spoke with Snowe on Friday, acknowledged that “at this stage” she dislikes a public option of any kind.

With or without Snowe, Reid said he’s going ahead with the opt-out public option, though he voiced hope that Snowe could still be convinced.

“We hope that Olympia will come back,” he said.

The lack of GOP support could unnerve centrists such as Sens. Ben Nelson (D-Neb.), Blanche Lincoln (D-Ark.) and Joe Lieberman (I-Conn.). All 60 Democratic votes will be needed to move healthcare reform forward on procedural votes if Republicans vote en masse against the legislation.

Public option supporters such as Senate Health, Education, Labor and Pensions (HELP) Committee Chairman Tom Harkin (D-Iowa) claim that the opt-out version has the support of as many as 58 of the 60 Democrats in the Senate, which places Reid within striking distance of a filibuster-proof majority for the bill without any Republican support.

Reid’s announcement capped off weeks of negotiations with White House officials, Sen. Chris Dodd (D-Conn.), who shepherded legislation through the  HELP Committee, and Senate Finance Committee Chairman Max Baucus (D-Mont.).

Among other differences, Dodd’s panel’s bill included a public option while the Finance Committee’s legislation did not.

Dodd and Baucus both announced they were fully behind Reid’s move.

“Majority Leader Reid has made a bold and right choice,” Dodd said in a statement. Baucus, who has long expressed doubt that the public option could win enough support in the Senate, said he “support[s] any provision, including a public option, that will ensure choice and competition and get the 60 votes needed to pass the Senate.”

In August, it appeared the public option was doomed as it came under criticism at raucous town halls around the country. Liberals grew anxious it would fall by the wayside in the centrist Senate, and activist groups prodded Reid, who faces a potentially difficult reelection campaign next year, to put a public option into the healthcare bill.

But public support for the concept built after Congress returned to Washington, and opinion polls appeared to bolster lawmakers.

Though the opt-out provision scales back the public option from the national, universally available form they favor, liberal senators and groups cheered Monday’s announcement.

“This form of public option is not exactly what either liberals or moderates would want. But a public plan based on a level playing field, with an opt-out for states, is the best compromise that has the potential of getting 60 votes in the Senate,” said Sen. Charles Schumer (D-N.Y.), who had promoted the opt-out compromise.

He said Reid “showed just how deep his commitment is” to the public option.

{mosads}Now, Reid and the Democrats will await a Congressional Budget Office (CBO) cost analysis of the combined bill — and hope the projection comes in fully paid for and below the $900 billion, 10-year limit on new spending set by President Barack Obama. Given the time needed to finalize the details of the legislation and receive a CBO score of its costs, the opening of the floor debate on healthcare reform could begin as soon as next week or slip to the middle of November.

White House press secretary Robert Gibbs said Obama was pleased the public option was included in the Senate bill, and that it had the potential to hold insurance companies accountable.Several important questions about the merged Senate bill remained unanswered, including whether employers would be required to provide health benefits and how stiff a penalty would be levied on individuals who do not obtain insurance.

Republicans immediately seized on Reid’s news, with GOP Senate Leader Mitch McConnell (Ky.) assailing a “thousand-page, trillion-dollar bill that raises premiums, raises taxes and slashes Medicare for our seniors to create new government spending programs.”

“That’s not reform. So, wholly aside from the debate over whether the government gets into the insurance business, the core of the proposal is a bill that the American public clearly does not like, and doesn’t support,” McConnell said in a statement.

The health insurance industry also railed against Reid’s decision.

“A new government-run plan would underpay doctors and hospitals rather than driving real reforms that bring down costs and improve quality,” America’s Health Insurance Plans President and CEO Karen Ignagni said in a statement. “The divisive debate about a government-run plan is a roadblock to reform.”

In her statement, Snowe touted her “trigger” proposal, which would establish a public option in states underserved by private insurance. She said this could have led to a broad bipartisan compromise.

Reid said he will not ask the CBO to analyze Snowe’s trigger proposal or any other public option alternative, though he insisted he’s “always” looking for GOP support.

“It’s just a little hard to find them,” said Reid, who said he could count Republican moderates on two fingers, a reference to Snowe and fellow Maine Republican Sen. Susan Collins.

Reid predicted that by the time the CBO issues its cost estimate and the floor debate begins, Democrats will line up together. “I believe we clearly will have the support of my caucus to move to this bill and start legislating,” he said.