The morality and politics of Federal healthcare in the USA are beyond the scope of this blog, but we do need to consider what it means for anyone operating a small business in the States.

This is still very unclear. Even the Senators and Congressman who passed the law seem confused. Once again, few have read it in its entirety.

Businesses with over 50 employees will be fined $750 per employee if they do not provide healthcare coverage. Those with less than 50 employees – possibly 100 in some states – will be able to buy heath insurance from state organised purchasing co-operatives.

The theory is that this will make insurance cheaper.

The practice is that bulk buying by government is not exactly renowned for getting the lowest price!

One suspects that most businesses will find it most convenient to continue to provide or not provide health insurance according to their existing individual ideologies and local/sector labour market norms. The $750 will be treated simply as another payroll tax.

This will have a fairly marginal, but negative, economic effect on the competitiveness of American jobs, but relatively little effect on healthcare as such.

However, other elements in the package will have the effect of raising the price of health insurance overall, wiping out even the most optimistic theoretical savings from bulk purchasing.

Particularly counter-productive is a 40% tax on the most comprehensive policies to be paid by insurers.

Entrepreneurs, more than most, understand that those on low incomes are not necessarily feckless, just as those on high incomes are not necessarily diligent.

Yet it cannot be denied that the net effect of the 40% levy will be to tax the health coverage of the most diligent, among others, in order to fund the feckless, among others.

Even if one believes in health reform, one has to ask why they could not come up with a better scheme than this?