U.S. House health bill to include government plan

* US House Democrats' health proposal has new public plan

* New government insurance plan is opposed by Republicans

WASHINGTON, June 8 (Reuters) - Democrats in the U.S. House of Representatives are preparing to unveil a proposal for a sweeping healthcare overhaul that includes a new public insurance plan and would require individuals and businesses to obtain coverage, lawmakers said on Monday.

Similar to legislation being developed in the Senate, the House bill would establish an insurance exchange to help people without employer-sponsored insurance find medical coverage. A new government insurance program would be one of the options available, lawmakers said.

"The exchange will be the vehicle in which we would have the public option, and people can go there to go shopping to determine whether you want a private plan or a public plan," House Ways and Means Committee Chairman Charles Rangel told reporters.

The bill also embraces extensive insurance market reforms that would bar insurers from denying coverage to people because of medical history. The House bill also calls for a mandate for individuals and businesses to obtain insurance.

Rangel said the legislation would include incentives for small businesses and penalties should companies fail to offer their workers insurance. Penalties for individuals have yet to be worked out, he said.

The Ways and Means Committee is one of three House committees developing healthcare legislation.

President Barack Obama wants to overhaul the U.S. healthcare system, aiming to cut costs and ensure that millions of Americans now without health insurance get coverage.

Healthcare costs burden many U.S. businesses and families and eat away at federal and state budgets.

Democratic Representative Lloyd Doggett said a new public insurance plan was "an essential" part of the proposal.

Republicans and insurers oppose a new public plan that would compete with insurance companies.

People 65 and older, the disabled and the poor already are eligible for the public Medicare and Medicaid insurance plans.

Some Senate Republicans wrote a letter to Obama on Monday arguing against a new public plan, saying it would lead to "a federal government takeover of our healthcare system."

Obama backs the idea of a public plan, but also has said he wants healthcare legislation by October that enjoys bipartisan support.

Rangel and the heads of the other two committees working on the bill will brief House Democrats on the legislation on Tuesday. Democratic members of the Ways and Means Committee, which is also working on the financing of the plan, are scheduled to meet with President Barack Obama on Tuesday to discuss the proposal.

Lawmakers and a committee aide stressed that what is being discussed was an outline, not the final draft of legislation.

Editing by Will Dunham