WASHINGTON (Reuters) - Efforts in the U.S. Senate to move away from a government-run insurance option may help win over critical votes but failed to bring around one major bloc -- big business.

Business groups such as the U.S. Chamber of Commerce have long opposed Democratic efforts to expand access to health insurance, including a government alternative to private coverage that they say would undermine the ability of employers to offer health benefits to their workers.

There are enough other weak spots in the bill that employers still cannot back the measure, they said.

“The bill ... is full of costly new mandates on business that will only lead businesses to lower wages on employees, lower working hours on many other employees, reduce hiring and lose jobs,” the chamber’s executive vice president Bruce Josten told reporters on Wednesday.

Senators embraced a plan late on Tuesday in which private insurers could offer nationwide insurance coverage overseen by the federal government. The compromise would also allow people as young as age 55 to buy into the Medicare insurance program for the elderly and tighten rules for private insurers.

Employers, which provide the bulk of health insurance to working-age Americans, argue any large government insurance role could drive workers out of the employer-based insurance system and make it harder to recruit and keep good workers.

“We oppose a government-run public plan in all of its forms, no matter how it is tweaked, no matter how it is contorted,” Josten said.

Other parts of the deal are also troubling, said National Retail Federation lobbyist Neil Trautwein.

Allowing younger workers into the Medicare program could shrink the nation’s workforce by enticing workers into earlier retirement, he said, but also could raise payroll taxes on employers and employees to help fund expansion.

“If you’re worried about an expanded federal role in healthcare, the public insurance option ... was one concern,” Trautwein told Reuters.

“This proposal, we think, is more of a full-scale expansion of the federal role in healthcare and really threatens the already shaky finances of the Medicare program.”

The Medicare program already spends nearly half a trillion dollars per year covering 45 million Americans who are age 65 and older or disabled. It is expected to run out of funds by 2017 unless action is taken.

‘FIGHTING THIS BILL TO KILL IT’

A number of other provisions in both the Senate’s proposal and the one passed last month by the House of Representatives would make a bigger dent on employers.

Both bills would require employers to offer coverage or pay higher taxes as well as automatically enroll workers in the company’s health insurance program, among other conditions.

The provisions could change as the Senate works to finalize its measure by the end of December. That bill would have to be reconciled with the House version before a final bill could be presented to President Barack Obama to sign into law.

That process of consolidating the bills “could get slightly worse for businesses,” whose concerns are likely to be overshadowed by more controversial issues such as the public insurance option and abortion, said Ethan Siegal, an analyst for Washington Exchange.

Smaller companies, which are even less likely than large employers to offer health benefits to workers, are particularly worried about the bill’s requirements even though some exceptions are made for small employers.

The National Federation of Independent Business, in a letter to the Senate’s top leaders this week, said the group expected insurers would raise premiums by passing along the Senate’s annual $6.7 billion tax, among other complaints.

Still, a number of more moderate senators whose votes are crucial to passing the legislation could still push for changes that would ease burdens on small companies.

A group of Democratic senators, including Mary Landrieu and Blanche Lincoln, said on Wednesday they will offer an amendment to boost tax breaks in the bill for small businesses that offer health insurance to their workers.

More liberal Democrats and other supporters have said a greater government hand in healthcare could help relieve recession-battered companies from having to provide expensive health benefits.

Most businesses don’t see it that way.

“What we’d gain in the way of not paying for care directly, we feel like we’d lose in the way of higher taxes to support that kind of system,” the retail group’s Trautwein said.

Businesses argue the healthcare changes will prove too costly but they have not yet made a strong case or offered solid data to show any jobs would be lost because of the overhaul, Siegal said.

“For the most part, employers ... are fighting this bill to kill it,” he said.