U.S. senators mull potential healthcare compromise

* Lawmakers weigh healthcare cooperatives proposal

* Seen as potential compromise in sweeping health reform

By Donna Smith

WASHINGTON, June 10 (Reuters) - U.S. senators considering sweeping changes to the U.S. healthcare system on Wednesday floated a proposal they say could bridge the divide over the government's role in providing affordable medical insurance to millions of uninsured Americans.

The measure offered by Democratic Senator Kent Conrad would create nonprofit cooperatives, owned and operated by their members, to compete with private insurers to provide healthcare to individuals and small businesses.

Senate Finance Committee Chairman Max Baucus, who has a lead role in writing healthcare reform legislation, said it could allay Republican concerns about expanding the role of government in healthcare while addressing Democratic demands for a plan that would inject more competition into the insurance market.

"It's a live option at the moment," Baucus told reporters following a meeting with committee members to discuss the idea. He said the proposal was discussed with President Barack Obama at a White House meeting earlier in the day.

Obama wants Congress to enact by October a measure that reins in soaring costs and provides coverage for an estimated 46 million uninsured Americans.

Obama backs a new government plan to compete with insurance companies to provide medical coverage to individuals and small businesses.

Republicans and insurance companies oppose it, arguing it would drive companies out of business and lead to a government-controlled health insurance system.

Baucus said cooperatives might satisfy both sides but that details had to be fleshed out.

Some Democrats, though, are cool to the idea.

"A public plan option that competes with private insurance and follows the same rules as private insurance is the only real way to give every American access to good, affordable health insurance," said Senator Jay Rockefeller, a Democrat who has offered his own version of a public insurance plan.

Senator Charles Grassley, the top Republican on the Senate Finance Committee, said the proposal had "possibilities."

But he told reporters that any federal money used to set up what likely would be state and regional health cooperatives would have to be in the form of loans and that the government should have no role in their operation.

Cooperatives have been used to set up electrical services in rural areas and at least one health cooperative operates in Washington state, Conrad said. (Editing by Xavier Briand)