"They should be free to make a profit. But they also have to be fair," he said.

The president's comments, which came two days before he is due to address the US congress on his domestic policy ambitions, are likely to alarm liberal Democrats, who have called for tough restrictions to be placed on health insurance firms.

A government–run healthcare option has been criticised by the multi-billion dollar health insurance industry and by opposition Republicans, who claim the government is trying to impose a socialist agenda.

Bipartisanship urged

Obama urged Democrats and Republicans to work in a spirit of bipartisanship to formulate a healthcare reform plan for the benefit of all Americans.

"It's time to do what's right for America's working families, to put aside the partisanship, to come together as a nation, to pass health insurance reform now - this year"

Barack Obama, US president

"It's time to do what's right for America's working families, to put aside the partisanship, to come together as a nation, to pass health insurance reform now - this year," he said.

Obama popularity ratings have dropped in recent weeks as he tries to reassert control over the healthcare reform debate.

He has argued that the US' $2.5 trillion healthcare system needs an urgent overhaul so that it can provide coverage to nearly all Americans.

About 46 million Americans are currently without health cover.

Obama is set to "draw some lines in the sand" on the issue during his prime-time speech to congress on Wednesday, Robert Gibbs, the White House spokesman, said on Sunday.

Critics of the Obama administration's healthcare reform plan say that it will inflate the country’s massive budget deficit, at a time when the US is struggling to recover from its most severe economic downturn since the Great Depression of the 1920s and 1930s.

A group of moderate Democratic and Republican senators have held a series of closed-door sessions aimed at skectching out reform proposals acceptable to both parties.