WASHINGTON - Lawmakers on both sides of the U.S. Capitol struggled to reach a healthcare deal on Tuesday, with Senate Democrats near agreement with three Republicans on a plan that would not include a government-run insurance option backed by President Barack Obama.

After more than six hours of closed-door meetings, however, Democrats in the House of Representatives said they had not reached a deal with rebellious fiscal conservatives and it was unlikely they would vote on a healthcare overhaul before heading home for their August recess at the end of the week.

House Democratic Leader Steny Hoyer said there would not be a vote on Friday and there was a pretty slim chance lawmakers would be held for a vote on Saturday. We're trying not to foreclose our options, he told reporters.

Obama has pushed for a measure that will rein in healthcare costs, improve care and cover most of the 46 million uninsured Americans, making it his top legislative priority.

Democrats on the Senate Finance Committee said they were close to success in bipartisan negotiations with three panel Republicans -- even if the full group does not take up the bill before the break starts on August 7.

Whether we get through markup or not I can't tell you today. But I am confident we'll have a concept we'll agree on, Senator John Kerry, a Democratic member of the panel, told reporters.

NON-PROFITS AND TAXES

The Senate Finance negotiations have zeroed in on a plan that would use non-profit cooperatives to compete with private insurers to drive down costs, members say, not the public plan favored by Obama and many Democrats.

The panel also is likely to back a tax on high-cost insurance policies to try to raise revenue and keep costs down.

The White House said it would wait until it sees the bill to comment on the cooperative approach, which is certain to disappoint some Democrats even if it wins over the three Republicans involved in the negotiations.

I have done a lot of reading on the history of co-ops and it is not a nice history, Senator John Rockefeller told reporters after a closed-door meeting of Democrats.

Democratic Senator Kent Conrad said the approach would use non-profit associations at a state, regional and national level and could attract some 12 million people.

He said the U.S. government could provide about $6 billion in start-up money to help healthcare cooperatives meet reserve requirements. Any co-op would need about 25,000 members to be financially viable and about 500,000 members to negotiate competitive rates with providers, he said.

Shares of U.S. health insurers rose broadly on Tuesday on hopes a health reform bill would not include a government-run option, which has drawn strong opposition from insurers who fear it would destroy the private marketplace.

The S&P Managed Health Care index of large U.S. health insurers closed 6.5 percent higher.

Aetna rose 12.6 percent, Coventry was up 12.7 percent and Cigna was 7.7 percent higher, all on the New York Stock Exchange. Centene rose 7.9 percent.
NO BLUE DOG DEAL

Obama's drive for a broad overhaul of the healthcare industry has been stalled in the Senate and House of Representatives, both controlled by his fellow Democrats. It has been hit by a deluge of criticism over the cost, scope and funding of the more than $1 trillion measure.

Republicans in both chambers have slammed the plans as an expensive first step to a government takeover of healthcare. No Republican has come out in favor of any of the plans so far, although the three Senate Republicans have worked with Senate Finance Committee Chairman Max Baucus to find agreement.

An August deadline to approve initial versions of the bill is dead in the Senate and on life support in the House, where conservative Democrats known as Blue Dogs have held up a vote in the Energy and Commerce Committee over cost concerns.

Members of the group met with Speaker Nancy Pelosi, Energy Committee Chairman Henry Waxman and White House Chief of Staff Rahm Emanuel for several hours on Tuesday afternoon and again Tuesday night.

Representative Mike Ross, a leader of the group, said there were still 12 issues of disagreement. It might be impossible to come to a resolution on some of them, he told reporters.

We continue to talk, he said as the final meeting broke up. Talks will resume in the morning. I'd like to think we're making progress, Ross said.

Obama, who over the past week has lobbied hard for the overhaul plan, said there was no time to lose.

The costs of doing nothing are trillions of dollars in costs over the next couple of decades -- trillions, not billions, Obama told a town hall meeting conducted by AARP, a lobbying group for seniors.

I understand people being scared that this is going to be way too costly, he said. It's not too costly if we start making changes right now.

(Additional reporting by David Alexander, Rick Cowan and Jackie Frank; Editing by John O'Callaghan and Eric Beech)

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