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The nation's largest health insurer trade group issued their strongest stand to date Tuesday against a public health insurance option, saying that any government plan would force "devastating consequences" on the current insurance arrangements.

America's Health Insurance Plans, which represents a broad range of U.S. health insurers, made the remarks in a June 19 letter to Sen. Edward Kennedy, D-Mass. Kennedy chairs the Senate Health, Education, Labor and Pensions Committee, which is considering health-care overhaul legislation in meetings this week.

The letter, also signed by Blue Cross and Blue Shield Association president Scott P. Serota, states that a public health insurance option "would dismantle employer-based coverage, significantly increase costs for those who remain in private coverage, and add additional liabilities to the federal budget."

Congressional Democrats have sought to soften the impact of a public plan by including assurances in their proposals that it would compete on a "level playing field" with private plans. For example, House Democrats issued a proposal last week that would not allow a new public plan to inherit the network of doctors and hospitals that Medicare already has.

But the letter states that a public plan would have adverse effects "no matter how it is initially structured."

Members of AHIP include large insurers such as Aetna Inc. (AET), Humana Inc. (HUM), Cigna Corp. (CI) and UnitedHealth Group (UNH).

The Senate Health panel has yet to unveil details of a public health insurance option expected in its version of the legislation. Sen. Christopher Dodd, D-Conn., who is leading efforts on the legislation in lieu of the ailing Kennedy, said Tuesday that concerns about the cost of the bill have kept committee Democrats from finalizing the public plan provision and a proposed requirement that employers provide health coverage or face a penalty.

Republicans on the committee strongly oppose both provisions.

The Senate Finance Committee is drafting its own version of health-care legislation, but it is still attempting to negotiate the measure on a bipartisan basis. Some Democrats on that panel, such as Sen. Kent Conrad, D-N.D., have warned that health-care legislation containing a public plan could not meet a 60-vote threshold needed to pass most legislation in the U.S. Senate.

Conrad has sought support for a non-governmental health co-operative that would see start-up funding from the federal government but that would eventually be run by its members. But Sen. Charles Schumer, D-N.Y., also a member of the Senate Finance panel, has stated that the co-op idea may not see support from some Senate Democrats.

-By Patrick Yoest, Dow Jones Newswires; 202-862-3554; patrick.yoest@dowjones.com