In its 11th-hour attempt to scuttle health care reform in the Senate, the health insurance industry may have inadvertently strengthened the case for what it fears most -- a public health care option, says a New York congressman.

In his set-up to an interview with US House Rep. Anthony Weiner (D-NY), MSNBC's David Shuster said the health industry may have "shot itself in the foot" by releasing a report on Sunday that predicted insurers would raise health premiums by 40 percent over four years as a result of health care reform.

The study (PDF), commissioned by America's Health Insurance Plans (AHIP) and carried out by auditing firm PricewaterhouseCoopers, also said rates would rise a whopping 111 percent by 2019 if the current health care reform proposals are passed into law.

"They unwittingly did this, but they made the single best argument I've seen in a while for why you need a vigorous competitor for the health insurance industry, namely a public plan," Rep. Weiner said on MSNBC's The Rachel Maddow Show Monday night. "They're freely saying that it doesn't matter what you guys in Congress do, we're gonna keep raising our rates. There's a word for this, it's called chutzpah."

Weiner said that many of his congressional colleagues who have seen the report "are responding in exactly the opposite way that I think the insurance industry thought we'd respond."

The congressman said his Democratic colleagues on the Hill are wondering why the health insurance industry would declare plans to raise rates after being given millions of new customers through the health reform plan's individual mandate, which compels uninsured people to buy health insurance.

"They're saying clearly that unless they have some competition, they're not going to contain costs themselves," Weiner said. "We're going to circulate this health care report as an example for why we need the public option."

Jon Gruber, an MIT economist who helped design Massachusetts' universal health care system, told the New York Times Wednesday that the industry report is "deeply flawed":

Mr. Gruber, who helped Massachusetts with its effort to provide universal health insurance coverage, said that the industry report failed to take into account administrative overhead costs that he said will “fall enormously” once insurance polices are sold through new government-regulated marketplaces, or exchanges.

And Mr. Gruber said that the PricewaterhouseCoopers report failed to take into account government subsidies that would be provided to help moderate-income Americans purchase insurance.

PricewaterhouseCoopers acknowledged in its report that it did not factor in the effect of those subsidies.

Gruber "reached the opposite conclusion" of the AHIP report, saying that insurance rates would actually decline for individuals and families purchasing health plans.

Wiener told MSNBC that opposition to a public option is softening as many conservative Blue Dog Democrats learn that the public option has robust support in many of their districts.

"A lot of the reason why Democrats got elected in these so-called swing districts is because we committed to doing something about the high cost of health care," he said.

"Frankly [this is] where Congress has to have a spine and stand up to these industries," Weiner concluded.

Rachel Maddow Show guest host David Shuster pointed out that PricewaterhouseCoopers, the author of the report, was hired by the tobacco industry in the 1990s to help prove that high taxes on tobacco would devastate the economy. That link was first brought up by Washington Post blogger Ezra Klein in his condemnation of the AHIP report.

This video is from MSNBC's The Rachel Maddow Show, broadcast Oct. 12, 2009.

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