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Cato's Michael Cannon has explained:

It makes no difference whether a new program adopts a “co-operative” model or any other. The government possesses so many tools for subsidizing its own program and increasing costs for private insurers—and has such a long history of subsidizing and protecting favored enterprises—that unfair advantages are inevitable.

Meanwhile, Robert Reich has attacked the idea from the left, arguing that co-ops "won't have the scale or authority to do what a public option would do."

Whichever argument you agree with (I'm with Cannon), the one thing that's perfectly clear is that the co-op idea isn't very viable as a compromise from a purely political perspective. Free market advocates see it as a government-run plan by another name, while liberals view it as a toothless cop out. The co-op idea is the result of a typical Washington dealmaking culture that tries to split the difference in any policy dispute, but it simply does not have a constituency outside of the Finance Committee of the U.S. Senate.