Key Finance Committee Democrats said Tuesday that their chairman’s $900 billion health care reform bill is unlikely to clear the panel without major surgery.

The Democrats are unhappy with several aspects of Finance Chairman Max Baucus’ (D-Mont.) proposal, particularly that it calls for nonprofit health insurance cooperatives rather than a public insurance option. And many made clear that they are unlikely to support the bill — the markup of which began Tuesday — if Baucus doesn’t make even more changes to it.

“I know that we all definitely are committed to moving forward and getting a bill,— said Finance member Debbie Stabenow (D-Mich.). “But I know that there are those of us that feel that some changes need to happen in committee.—

Since Baucus issued his original $856 billion health care proposal last week, Finance Democrats have held extensive discussions to plot their markup strategy. And while some progress was made, committee member and Democratic Conference Vice Chairman Charles Schumer (N.Y.) acknowledged Tuesday that no agreement was reached over whether to strip the co-ops in favor of a public insurance option.

In fact, several Democrats, while lauding Baucus’ effort and portions of his bill, used their opening statements at Tuesday’s markup session to criticize the co-op proposal in favor of the public insurance option. Among those Senators were Schumer, Finance Subcommittee on Health Care Chairman Jay Rockefeller (W.Va.) and Jeff Bingaman (N.M.), who spent several months working with a bipartisan gang of six Finance members negotiating a health care deal.

“I have thought that a more straightforward public option … would be an even better way to go,— Bingaman said in his opening statement. “I hope that we can make that improvement as we go forward.—

Heading into Tuesday’s session, Democrats and Republicans on the Hill believed the co-ops would survive the Finance Committee; most believed that any attempt to strip them in favor of the public insurance option would come either in the forthcoming merger with the Health, Education, Labor and Pensions Committee’s bill or on the floor.

But even Finance member and Budget Chairman Kent Conrad (D-N.D.), who originally came up with the idea of co-ops to attract bipartisan support for health care legislation, declined to predict that the provision would be part of the committee’s final bill.

[IMGCAP(1)]“I don’t know. I really don’t know,— Conrad said when asked if the final Finance bill would include co-ops.

Committee Democrats were also fighting to change Baucus’ bill on another front: affordability. Finance Republicans were almost unanimous in their opposition to the measure, although they too applauded Baucus for trying to craft a bipartisan bill.

The Baucus proposal would require all Americans to carry health insurance but makes exceptions for low- and middle-income families and individuals. But many Democrats said the measure’s income limits are not realistic given the costs of insurance and how much people can afford to spend on it. Democrats on the committee, as well as Republicans, have said they are concerned that middle-class families who can’t afford to buy insurance will be penalized unfairly and be in the same predicament they are now.

But Baucus, who already modified his proposal to exempt more Americans, said making more exceptions for middle-income families could push the measure’s price tag up too far, including beyond parameters laid out by the White House. The bill already grew from $856 billion to $900 billion after Baucus made some pre-markup tweaks.

“It comes down to where we find the money to pay for it, because we’re already at $900 billion,— Baucus said of his modified bill. “I’d like it to get a clean bill of health from [the Congressional Budget Office] when we actually finalize our bill before we vote on it. There are some Senators who very much want that. I want it, too.—

It was unclear Tuesday whether any Finance Democrat would actually offer an amendment to create a public insurance option, which is preferred by President Barack Obama and most Democrats. And most predicted the amendment would be dead on arrival.

Instead, some Senate Democratic aides said the major battle in Finance could be over Sen. Olympia Snowe’s (R-Maine) proposal to tie the creation of a public plan to the ability of private insurers to bring down costs and increase coverage.

Snowe’s “trigger— for the public insurance option would likely compete with Baucus’ push to create of a network of nonprofit health insurance cooperatives. Several aides said that Finance Democrats may decide to vote for Snowe’s trigger if the votes do not materialize for creating a public insurance option without one.

“That doesn’t mean public option advocates are satisfied with a trigger,— one aide cautioned. “The trigger just represents the ceiling of what’s doable in Finance.—

Another option some Finance Democrats were considering late Tuesday was to eliminate the co-op model without replacing it with another plan. If that happened, the public insurance option included in the HELP bill would likely be the default option during a planned merger of the measures.

Snowe, who also participated in the bipartisan gang of six, said she was not sure she would have the votes to pass her amendment, and she said she is not yet sure when she would offer her proposal. She also noted that her plan could change depending on how the bill is amended in the interim. Baucus said he could envision a scenario where Snowe’s trigger would be included, but he did not endorse the idea.

“A trigger could come up and could pass,— he said. “There’s not been a lot of discussion about a trigger in all the meetings we’ve held on both sides. It really has not come up. I read more about it in the press than I hear about it in the meetings.—