WASHINGTON (Reuters) - Congressional Democrats moved on Wednesday to repeal the health insurance industry’s exemption from antitrust laws, cranking up the pressure in a growing battle over President Barack Obama’s healthcare reform plans.

The moves were the latest chapter in an escalating feud between the industry and backers of sweeping healthcare reform that would tighten regulations and create a government-run public insurance option to compete with private insurers.

The fight intensified after an industry lobbying group issued a report saying the healthcare reform plan under consideration in Congress would raise insurance premiums, which sparked protests from Democrats and the White House.

“It’s time to level the playing field for American healthcare consumers and make the insurance industry play by the same rules that other industries live by,” Senate Democratic leader Harry Reid said.

Proposals in the Senate and House of Representatives would repeal or refine the antitrust exemption granted the industry in 1945. Supporters said the exemption limited competition in an industry where one or two companies often dominate a state insurance market.

“It’s a different universe today than it was in 1945, and this exemption is antiquated, out-of-date, and doesn’t belong,” Democratic Senator Charles Schumer said.

Senate Democratic leaders said they would offer their proposal to repeal the exemption as an amendment to a sweeping bill to overhaul the U.S. healthcare system when it hits the Senate floor in the next few weeks.

The House of Representatives Judiciary Committee passed a plan to limit the exemption and make health and medical malpractice insurance companies subject to laws on price-fixing and market allocation.

House Democratic leaders said it would be folded into a healthcare reform bill that is nearly ready for floor debate.

The trade group representing the industry, America’s Health Insurance Plans, said in a letter to House Judiciary Committee Chairman John Conyers the proposals “attempt to remedy a problem that does not exist.”

“We believe that health insurers have not been engaging in anti-competitive conduct,” Chief Executive Karen Ignagni said.

Obama has made his top domestic priority a healthcare overhaul that reins in costs, regulates the insurance market and expands coverage, and the insurance industry has emerged as a vocal opponent to plans for a government-run public insurance option.

Opinion polls show the public is divided on his healthcare plans, including the public option backed by Obama and liberals as a way to increase competition but derided by critics as a big-government takeover.

A USA Today/Gallup poll released on Wednesday found 50 percent backed a public option and 46 percent opposed it, but a CNN poll found 61 percent supported an insurance option administered by the government and 38 percent opposed.

HOUSE CLOSE TO DECISION

Democratic House leaders, who have been meeting for weeks to merge three healthcare bills into one, are close to making final decisions on a plan that could include the most liberal version of a government-run public insurance option.

Democrats were conducting a head count to gauge whether a bill that includes the strong version of a public option preferred by House liberals had the 218 votes needed to pass.

“We will have a bill passed well before Thanksgiving,” House Speaker Nancy Pelosi told reporters on Wednesday.

The inclusion of the strongest possible government-run public insurance option in the House bill could force a confrontation with the Senate, where the public option has less support and is less certain to be included in a final bill.

Senate Democratic leaders are merging two bills, but only one of the proposals includes the government-run plan.

Pelosi said on Tuesday preliminary Congressional Budget Office estimates indicated all three versions of a public option would reduce the budget deficit over 10 years and at least two of the three would come in below $900 billion.

House Democrats were expected to meet again late on Wednesday to discuss their options.

On a related measure, Senate Democratic leaders dropped a proposal to scrap the current Medicare payment system for doctors after the bill failed to gain enough votes to clear a procedural hurdle.

Republicans and a number of Democrats opposed a proposal to boost doctors’ payments under Medicare, the health program for the elderly, by $250 billion over 10 years. Opponents were concerned the measure would add to a record $1.4 trillion U.S. budget deficit this year.