A Senate Finance Committee paper released Monday outlines several divergent approaches to creating a public health insurance option, including one modeled after Medicare and another that would mimic private insurance companies.

Public plan proposals have taken center stage in debates over writing health-care legislation in recent months, becoming something of a partisan litmus test. The White House and congressional Democrats favor the creation of a public plan, saying it would force greater competition in private insurance markets, while Republicans have expressed concern that it would undercut private insurers.

An "options paper" released Monday by the finance panel outlines two paths for a public plan option.

The first, a Medicare-like plan, would pay a rate based on Medicare rates and increased by 0% to 10% and would require doctors and hospitals that currently accept Medicare beneficiaries to accept the new beneficiaries. It would be administered by the Department of Health and Human Services and would not be required to hold cash reserves - as most publicly traded companies are.

The second option presented by the committee would be separated from HHS and instead run by regional administrators. The administrators would create their own provider networks - instead of adopting Medicare's network - and would have solvency standards that would require them to hold reserve funds.

That option tracks closely with a proposal recently hashed out by Sen. Charles Schumer, D-N.Y., who sits on the finance panel, and is likely to have more support from moderates in the Senate who maintain that a public plan should be on a "level playing field" with private insurers.

"I think it's the only way a public plan could work," Sen. Blanche Lincoln, D-Ark., said last week. Lincoln sits on the finance panel.

Schumer's proposal has seen traction recently, with Sen. Arlen Specter, D-Pa., stating in a May 8 letter to the advocacy group Health Care for America Now that Schumer's plan could be a "starting point" for discussions on a public plan.

A third option included in the paper would allow or require states to create their own public plans, with the possibility of states expanding state employee health plans to include nonemployees.

Alternatively, the finance paper suggests that the legislation could forgo a public health insurance option and rely on private insurers "in a reformed and well-regulated private market."

America's Health Insurance Plans, a trade group of insurers that includes Aetna Inc. (AET), Humana Inc. (HUM), Cigna Corp. (CI) and UnitedHealth Group Inc. (UNH), has expressed reservations about a public plan option and instead suggested that major changes to the health insurance market could resolve many problems for individuals trying to purchase insurance.

-By Patrick Yoest, Dow Jones Newswires; 202-862-3554; patrick.yoest@dowjones.com