Senate Democratic leaders are showing flexibility over a public insurance option that Republicans fiercely oppose to being included in any plan to overhaul the health care system.

Senate Majority Leader Harry Reid told reporters Thursday that a system of nonprofit cooperatives could pass as a "public option," or government-run health care, depending on how they are set up.

"We're going to have some type of public option, call it 'co-op', call it what you want," the Nevada Democrat said, adding that Democrats are working on "some version of a co-op that may satisfy everyone."

This is not likely to please the legions of liberal Democrats clamoring for a plan fully-setup and managed by the federal government.

Reid has made similar comments before, but this comes one day after he met at the White House with Vice President Biden, top health care advisor Nancy-Ann DeParle, and White House Deputy Chief of Staff Jim Messina.

Sen. Kent Conrad, D-N.D. authored the co-op plan, which is still being tinkered with, but  working with Sen Chuck Schumer, D-N.Y., and other Democrats, some changes have been agreed to -- like a major infusion of federal dollars at the beginning and an initial governing board set up by the feds with federal involvement. 

One point of contention, however, has been how long government officials remain on the board. Conrad has contended that the board should eventually be run solely by participants. Schumer and others have sought a continued government presence, trying to create a quasi-public option.

"We don't care what it's called. We need something that's going to keep the insurance companies honest," Schumer said, adding that any co-op plan must also "be available right at the beginning, have competition...and have the strength to bargain." 

Schumer said the negotiations "are going pretty well."

Sen Orrin Hatch, R-Utah, who has been at the center of bipartisan negotiations, told reporters that he thinks perhaps the goal of universal health care should be scaled back "to cover the 13 to 16 million people in this country who are uninsured." 

Hatch said Congress "should get away from spending a trillion dollars" and focus on those who truly need help. That said, Hatch said he will continue to try to find common ground on a larger overhaul.

Some Republicans and a handful of Democrats have indicated that more time is needed to craft legislation, particularly the somewhat daunting task of merging a bipartisan Finance Committee product with a more partisan bill from the Health Committee.

But Reid showed no signs of budging.

"We are keeping our time line," Reid said, referring to having a bill done before the August recess, noting that there have been some setbacks, particularly the sudden death of the sister of Sen. Chris Dodd, D-Conn, acting chairman of the Senate Health, Education, Labor, and Pensions Committee. 

"We will have our work cut out for us," Reid added.

The Finance Committee is close to finishing its bill, but one major sticking point remains: how to find $320 billion in revenue to offset spending.

Many Democrats oppose taxing employer-provided health benefits. They fear that any such tax would break a major campaign promise not to tax the middle class.

While Conrad said the Finance Committee is considering raising the value of benefits to $25,000, after which a tax would be imposed and bring in about $90 billion in revenue, Schumer said he and many Democrats still fear this would hit middle-class Americans.

"There are a good number of people, union members and non-union members who say, 'I'll only take a salary of $50 or $60,000 dollars...but I want a really good health care plan," said  Schumer, who is undoubtedly under pressure from constituents in his own state. "And in some states, particularly police and fire, but not just police and fire, you may get up to that level. So that's the question we're researching,"

Numerous aides to Finance Committee members have said the tax will eventually be removed from the bill, but members have had trouble coming up with alternative means of raising the cash, something that always causes angst among members. 

"Just because we're talking about raising revenue, does not mean that the health care bill is going to cost the American people more money," Reid said, illustrating that point.

"The reason we're doing this is to save money," Reid said.