Jacob Hacker, the father of the public option policy idea that became part of the health care plan President Obama won and ran on, has laid down the definitive word on co-ops today:

The Senate Finance Committee’s cooperative model is not good, nor even not-so-good. It is “ugly.” Although few specifics about the model are available, there is absolutely no reason to think that cooperatives of any sort could achieve the three crucial goal that a competing public plan must accomplish—provide a backup option offering health and financial security to individuals without employer coverage, a cost and quality benchmark, and a cost-control backstop that drives payment and delivery system reform.

In a call with Representatives Grijalva and Ellison, Hacker released his new report on the public option proposals in Congress, calling the co-op proposal a "cop-out."

He doesn't just say it, of course. He proves it:

Consumer cooperatives would have several severe disadvantages. First, they would require building a new set of plans largely from scratch in markets often dominated by one or two powerful insurers. This would mean forfeiting the administrative, economic, and political advantages of building on the Medicare infrastructure to a get a new alternative to private plans up and running quickly.   Second, such models would also require forfeiting another major advantage of a Medicare-like public plan: the ability to provide enrollees with a broad choice of providers. The only two sizable examples of consumer health cooperatives, Group Health Cooperative of Puget Sound and HealthPartners in Minnesota, are both health maintenance organizations (HMOs) with restricted provider networks. And they have had decades to become established. New cooperatives would face the same problems breaking into markets that smaller private competitors face in many markets today. Analysts at Oppenheimer, Carl McDonald and James Naklicki, report that “as the co-ops are currently described, we think they would be a big positive for the managed care group, but it seems to us that they would be destined to fail from the moment of creation.”

The history of health cooperatives backs up McDonald and Naklicki’s pessimism. Cooperatives of various sorts have been discussed and sometimes created to provide health care in the past. After the Great Depression, the Farm Security Administration encouraged the development of health cooperatives–which at one point had about 600,000 members, mostly in rural areas. But the cooperatives crumbled in the face of physician resistance (including boycotts), the lack of financial wherewithal of the cooperatives themselves, and the eventual withdrawal of government support.

Even today’s remnants of the cooperative movement do not provide the most inspiring of lessons. The only survivor of the 1940s experiment is Group Health Cooperative of Puget Sound. It is a well-regarded HMO, paying doctors on a salaried basis but, unfortunately, is now little different from other nonprofit HMOs, with around a half million members in Idaho and Washington State. By contrast, WellPoint—the nation’s largest insurer and a major force behind the defeat of health care reform in another West Coast state, California—has more than 33 million members.

As Hacker says, this co-op idea will not work to hold insurance companies accountable and drive down costs, and as such, in his words, it's "not ready for primetime."