It's axiomatic throughout so many government departments the government is not allowed to compete with private business. Why? Because the United States government is incapable of competing fairly.
It's a matter of structure, not of malice or intent. Think about it: Government organizations don't count salaries among their costs those are funded under a separate line item. They also don't pay overhead or property taxes (among other things), and they don't have to follow state or local regulations. The differences in accounting standards, alone, are enough to insure against a level playing field; the rest just make the problem worse.
Here's the bottom line: A "public option" or "healthcare coop" will destroy competition and bankrupt health insurance companies unless it is very carefully crafted. And Congress has demonstrated it is incapable of carefully doing anything.
There are a huge number of companies in the United States offering healthcare insurance. If the Congress really wants to increase competition, all it has to do is allow them to compete nationally just like they can in the Medicare Supplemental / Medicare Advantage arena.
Remove the barriers and they will compete. Implement government "competition" and they will die. In the former case, costs will come down. In the latter, costs will skyrocket.
Congressional actions will demonstrate what Congress really wants to do, as opposed to what they want to pretend they want to do. If Congress presses ahead with the "public option", it will demonstrate an intent to socialize medical care with a single payer scheme leading to a national healthcare program.