The country's leading health insurers, America's Health Insurance Plans and the Blue Cross Blue Shield Assn., said they would be willing to charge less premiums from sick people if coverage for all Americans was made mandatory.

Tuesday’s proposal was included in a letter to Senate leaders by the two main health insurers in a move to try to redeem their image and contribute in the debate over how to overhaul the U.S. health-care system. Lawmakers on Capitol Hill have been debating a proposal to create a government run insurance program which would compete with private carriers.

Karen Ignagni, president of America's Health Insurance Plans, and Blue Cross Blue Shield Association President Scott P. Serota outlining the policy change in the letter said, "We get a continued recognition that we're working very hard to solve the problems and demonstrating the private sector can work."

The insurers said all Americans must first purchase health insurance to boost the size of the risk pool, a concept opposed by many consumer groups.

In the letter the insurers said, "By enacting an effective, enforceable requirement that all Americans assume responsibility to obtain and maintain health insurance, we believe we could guarantee issue coverage with no pre-existing condition exclusions and phase out the practice of varying premiums based on health status in the individual market."

The insurers have earlier said that they were willing to cover even those with pre-existing illnesses as long as it was made mandatory for everyone to get insurance however the offer to keep the premiums low for the people who were sick is a new addition.

The letter did not rule out charging varying premiums and said that insurers would still have to be able to set different rates according to age, geography, family size and plan design "to maintain affordability" for many people. They were open to offer discounts for people who engage in healthier behaviors such as quitting smoking and adhering to treatment programs for chronic diseases.

The health insurance industry has had to face mounting criticism of the industry in Washington with the industry's underwriting policies being widely criticized for driving millions of people into the ranks of the uninsured.

According to a study released Tuesday by the Robert Wood Johnson Foundation, the number of uninsured people in the U.S. has increased by nearly 9 million since 1994, reaching 45.7 million and nearly one in five working adults is uninsured.

Insurers want to help reverse that said Ignagni, Tuesday, "The private sector can rise to the challenge of solving these problems.”

CRT Capital Group analyst Sheryl Skolnick, who follows the insurance industry, said insurers have decided that they have more benefit by leaving variable pricing rather than fighting to maintain it. "I'm sure they want this to be seen as a major step forward in promoting reform," Skolnick said. "I just want to know what the catch is."

The proposal to create a government run plan has met with opposition with some saying it would lead to the creation of a single-payer system akin to those in Canada and Great Britain.

Ignagni and Serota in the letter said, "Creating a new government-run plan would thwart the ability of the healthcare sector to implement meaningful delivery system reforms, exacerbate the cost shifting from public programs to consumers in the private market, and destabilize the employer-based system."

Several lawmakers praised the insurer’s letter but an aide to Senate Finance Committee Chairman Max Baucus (D-Mont.), who is a leader in the effort on Capitol Hill to overhaul the healthcare system, said he would not back away from creating a new government insurance program.

The White House declined to comment on the offer and Richard Kirsch, who heads Healthcare For Americans Now, a leading consumer group in Washington said, "It's a sign of their desperation," said Kirsch. "They are still looking to find out how they can charge us as much as they want and have no competition from a public plan."

Cigna Corp. Chief Executive H. Edward Hanway said, "I think that if we as an industry are willing to make substantial changes, then the need to have a public plan is extremely questionable."