Whether health care reform legislation should include a public option–an option opposed by the insurance industry–remains a critical stumbling block as the debate on the legislation moves to the Senate floor in the near future.

The focus has shifted to the Senate after the House narrowly passed its version of the legislation, one including a public option, near midnight on Nov. 7 after months of debate.

The Senate bill was scheduled to be unveiled late last week by Sen. Harry Reid, D-Nev., Senate majority leader.

Reid has spent several weeks behind closed doors melding two different bills into one piece of legislation that he has said will include a public option.

Beth Mantz Steindecker, a healthcare analyst at Washington Analysis, predicts that the Senate will need a minimum of two weeks for debate. With the Thanksgiving recess (November 23-27), that means the earliest passage in the Senate would occur is the week of December 7. That would give conferees a mere two weeks to pass the bill before the winter recess.

“Given that we don’t know when Reid will drop his bill, and Republicans are promising to slow down the floor debate with amendments, a more likely scenario is that the Senate passes a bill by the end of the year, and the final bill is enacted next year before the State of the Union, which usually occurs in late January,” she said.

The House version includes the creation of a government-run insurance plan aimed at promoting competition with private insurers. Under the House bill, reimbursement rates for doctors and hospitals will be negotiated.

However, congressional staffers and healthcare analysts don’t believe Reid has the 60 votes needed to initiate debate on a bill containing a public option, even one that would allow an opt-out on a state-by-state basis.

Many believe that after a show vote rejecting a bill containing a public option, Reid will unveil a Plan B without a public option–or one with a public option as a backup–that will launch what is expected to be two weeks of debate on the bill.

According to officials at the National Association of Health Underwriters, if there is one issue that is a show stopper for the insurance industry, it is the public option.

“It is the political impasse through which Sen. Reid is seeking to thread the needle,” said John Greene, NAHU vice president of congressional affairs.

“For NAHU, no version of public option; opt-out, opt-in, trigger will be workable in practice,” he said. “Simply changing the shade of lipstick on the pig doesn’t change the fact it is still a pig.”

A second critical issue is affordability of premiums. “Agents want an affordable marketplace but the proposed taxes and the rating bands would have a deeply negative effect on the premiums,” Greene said.

He also said that “bending the cost curve is important for the long run and agents are sensitive to it.”

NAHU strongly supports employer wellness programs and disease management tools among other things, to change employee behavior and control costs, Greene said.

Besides the public option, there are four other so-called “flash points” the Senate must deal with as the tortuous path to reform continues.

One is cost. One reason Sen. Reid kept delaying the unveiling of his bill is weighing its provisions against cost as determined by the Congressional Budget Office. The House bill would cost about $1.2 trillion over 10 years; Reid is adjusting provisions for the Senate bill to keep it under $900 billion.

Paying for the bill through various taxes is another flash point. The House bill would assess a 5.4% income surcharge on individuals with an adjusted gross income of more than $500,000 a year and on couples with more than $1 million.

The Senate bill, as proposed by the Senate Finance Committee, would charge an excise tax on so-called “Cadillac plans” and also charge new annual fees to various industry sectors: $6.7 billion from insurance companies, $4 billion from manufacturers of medical devices, and $2.3 billion from drug makers.

A third flash point is the proposed individual mandate, the so-called “coverage” issue.

Specifically, the House bill would require employers to provide coverage; the Senate does not.

This is a critical issue for officials of AHIA/the National Association of Insurance and Financial Advisors.

“As currently drafted, the individual mandate’s rules create a strong incentive for individuals to choose to pay a fine rather than to buy health insurance,” AHIA/NAIFA officials said. “The fine is much, much lower than the cost of health insurance.

“And health insurance can be bought after a person gets sick or hurt, on a guaranteed basis, for the same price as if it were purchased while the buyer is healthy,” they argued.

“Congress must fix this problem, or the health care payment system will get much worse than it currently is,” AHIA/NAIFA officials said.

“Congress must put risk back into the health insurance buying decision,” they said. “People must believe they need the insurance before they get sick or hurt.”

The “Cadillac plan” issue is another AHIA/NAIFA concern. “We support health reform that refrains from taxing Americans on the value of the insurance they receive from their employers,” he said.

“We encourage members of Congress to support legislation that does not cap contributions to flexible spending arrangements (FSAs), or if a cap is unavoidable, to index that cap.”

A late-developing flash point was abortion. House Democrats agreed at the last minute to allow a vote on an amendment that restricts coverage of abortion in that chamber’s version of reform, and it passed by a wide margin.

Several Senate Democrats said they would oppose the bill if it didn’t contain such a provision, and abortion rights groups and President Obama said the language needed to be softened or removed before they would support the bill.

The House bill, H.R. 3962, the Affordable Health Care for America Act, passed the House on Nov. 7 by a margin of 220-215.

The House bill would create a new government-regulated insurance “exchange” where private companies would sell policies in competition with the government.

The bill adds a new provision that would add incentives for the creation of additional state-based non-profit “cooperatives.”

But it contains a provision that assures insurance agents’ ability to continue to offer all products sold in the “exchange” environment.

In addition to creating such a “public option,” the legislation would eliminate medical underwriting for all groups and establish a narrow community rating law (with no more than a 2-1 rating ratio for older, sicker workers as compared to the young and healthy), said Joel Kopperud, a director of government relations at the Council of Insurance Agents and Brokers.

Both the House and Senate bills gradually would extend coverage to nearly all Americans by providing government subsidies to help pay premiums.

The measures would bar insurers’ practices such as charging more to those in poor health or denying them coverage altogether.

Under both bills, all Americans would be required to carry health insurance, either through an employer, a government plan or by purchasing it on their own.

To reduce costs, the government subsidies and consumer protections don’t take effect until 2013. During the three-year transition, both bills would provide $5 billion in federal dollars to help get coverage for people with medical problems who are turned down by private insurers.