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UPDATE 1-Pelosi condemns U.S. health insurance industry

* Pelosi says industry report shows need for public option

* Says industry can’t take competition (Adds quotes, details)

WASHINGTON, Oct 15 (Reuters) - U.S. House of Representatives Speaker Nancy Pelosi condemned the insurance industry on Thursday and said its criticisms of healthcare reform efforts made the need for a government-run “public” insurance option even greater.

She said Congress, which is considering a sweeping healthcare overhaul, could not throw people into “the lion’s den” by passing a bill that forces them to buy insurance but does not offer a government plan to create competition.

Pelosi, the top House Democrat, pointed to a “discredited” report paid for by the industry that found a healthcare bill pending in Congress would raise insurance premiums for consumers.

“When you think of the campaign that’s been launched against the public option by the insurance industry -- because they can’t take the competition,” Pelosi told reporters.

“Anyone who had any doubts about the need for such an option need only look at the health insurance industry this week,” she said.

Karen Ignagni, president of the trade group America’s Health Insurance Plans, defended the study in testimoney to the Senate health committee on Thursday. “It shows that costs will go up even faster than they would under the current system,” she said.

The comments by Pelosi were the latest salvo in an escalating battle between angry Democrats and the insurance industry after the report was released on the eve of a crucial vote in the Senate Finance Committee.

Senate Democratic leader Harry Reid testified at a Senate hearing on Wednesday in favor of revoking the industry’s antitrust exemption, and Pelosi said there was “tremendous interest” in that approach.

“There are some things that we want to see happen to the insurance companies that they may not like,” Pelosi said, including a flat $40 billion fee on insurance companies included in a Senate measure.

Pelosi said last week the House also would consider a windfall profits tax on the industry, which has strongly opposed inclusion of a government-run public option in the healthcare overhaul.

The public option is favored by President Barack Obama and liberal Democrats as a way to create competition in the insurance market, but critics fear it could hurt private industry and represent too much government intrusion in the sector.

It is included in all three pending House bills being merged into one for floor action, but its prospects are more uncertain in the Senate, where only one of two pending bills includes the option.

The House and Senate versions ultimately will be combined into one bill, and Pelosi said the House would go into the negotiations with the strongest government-run plan possible.

“This is about going into that room and coming out with the best coverage and the lowest cost for America’s working families,” she said. “I believe that is best achieved by going to the table with the public option.”

Editing by Philip Barbara