In a bizarre story from corporate America this Thursday, AOL Chairman and CEO Tim Armstrong blamed the babies of two employees for increasing the company’s benefit costs.
During a conference, Armstrong cited that his company had to pay millions in medical bills, going on to casually mention that AOL would be altering its entire benefits package.
[box type=”shadow”]“We had two AOL-ers that had distressed babies that were born that we paid a million dollars each to make sure those babies were OK in general,” Armstrong said. “And those are the things that add up into our benefits cost. So when we had the final decision about what benefits to cut because of the increased healthcare costs, we made the decision, and I made the decision, to basically change the 401(k) plan.”[/box]
As a result of the changes, ThinkProgress reports that “AOL employees will not be able to collect any matching funds toward their retirement savings from the company for any given year if they leave before Dec. 31 of that year.”
[box type=”shadow”]But health care experts ThinkProgress contacted questioned why a large self-insured company with more than 5,000 employees could not absorb the additional health care costs associated with the pregnancies. Large employers typically purchase reinsurance, which could cover a substantial share of big claims and ensure stability in cases of larger-than expected medical payouts.
“The Affordable Care Act is simply a convenient whipping boy for any decision an employer makes to cut benefits,” Tim Jost, a law professor at Washington and Lee, said. “Assuming AOL had reasonably generous coverage like most large employers, it should not have experienced any significant changes in its benefit structure for 2014. Perhaps it had to pick up a few more employees that had not been covered before or reduce premiums for a few employees, but it is hard to see $7.1 million here.”[/box]
AOL is still reeling from some poor business decisions. According to the Washington Post, “quarterly earnings were hurt by $13.2 million in costs associated with layoffs, including at Patch, the struggling local news venture recently sold to investment firm Hale Global. The Patch unit, championed by Armstrong, has lost an estimated $200 million.”