AOL chief cuts 401k benefits, blames Obamacare and two “distressed babies”

http://www.washingtonpost.com/blogs/wonkblog/wp/2014/02/06/aol-chief-cuts-401k-benefits-blames-obamacare

by rsobers • 12 years ago

59 105 12 years ago

I wouldn't have expected this sort of behavior from a big tech company like AOL.

a3n4• 12 years ago

This is the guy that publicly fired someone during a conference call without a moment's thought, at the snap of a neuron, and without whatever procedures were in place at his company. You should expect this kind of behavior from him 24/7.

timje12• 12 years ago

Is this the same AOL that still gets a good chunk of money each year from people that never cancelled their 56k internet subscription when they got ADSL?

I think AOL is one large moral-free zone.

gdulli3• 12 years ago

Why is it a moral failing for AOL to leave it up to its customers to be responsible for the decision of what services they do or don't need?

wtbob• 12 years ago

IBM went to the EOY lump-sum 401(k) plan awhile back.

a3n4• 12 years ago

Nut.

givehimagun• 12 years ago

They make 1.04 billion in profit each year and 9 million has him worried? It also seems to be a breech of trust that he outed 2 women and their children in this. I wonder if coworkers will have any backlash against these women. If that does happen it then it could easily become grounds for a lawsuit against AOL.

Also they spent $405 million on an acquisition in August (8 months ago): https://en.wikipedia.org/wiki/List_of_acquisitions_by_AOL

vikas56782• 12 years ago

Yes, I was thinking the same. Clearly in a company, everyone will eventually find out who these women are, so although he didnt break any laws by revealing their names, these women are probably feeling pretty targeted right now.

bilbo0s3• 12 years ago

I have to admit...

the baby thing really bothered me.

If you want to make a political statement against Obama... fine... I get it.

But why drag two innocent families into this? What were these people supposed to do??? NOT try to help their children???

That was a very classless maneuver on AOL's part. Just state that your medical benefit costs were higher than expected this year. Don't be a douche about the whole thing.

I apologize for the rant... just rubbed me the wrong way.

gcb03• 12 years ago

So it served it's purpose.

Now instead of getting everyone outraged against benefit cuts for political action, you think that is fine but want reparation for the baby comment.

forgot the name of this discourse diatribe, but apparently it's effective.

protomyth6• 12 years ago

Well, the "distressed babies" comment is par for the course from Mr. Armstrong. He is not doing any other tech companies CEO any favors. He does remind me of the one psycho that attends a peaceful protest, but gets all of the press coverage to show the protest in a bad light. He says foolish things so he is the representative of all tech CEOs in an unfriendly, as of late, press.

As to the health insurance, yes, its going to go up for most and with higher deductible and premiums. All the rhetoric now meets the pavement.

jbooth7• 12 years ago

Health insurance has been increasing by ~9% a year since the late 1990s. Obamacare is predicted by the CBO to bend the cost curve in the right direction but it's not going to 0% or sub-inflation anytime soon. Anybody blaming their cost structure on Obamacare is just being opportunistic, although I guess I can't blame them. Getting a multi-billion dollar media machine pushing a message makes it persuasive.

torkins• 12 years ago

premiums rose by 4% for 2013, so that's the right direction, even sub 5%

edit: http://www.nytimes.com/2013/08/21/business/survey-finds-mode...

Aloha• 12 years ago

Yes, exactly.

It's not really the insurers that are causing the cost rise, its the systemic imbalances and cost shifting - by taking cost shifting out, we can reduce the cost for each person who is actually paying.

ohashi• 12 years ago

I've seen you say this twice in this thread. Care to provide some evidence supporting this statement?

phren0logy• 12 years ago

I agree, except for your comment about higher deductibles and premiums. I think we may see that as a brief and temporary phenomenon, but the trend will be toward lower cost care.

protomyth6• 12 years ago

Well, in the individual market it is quite bad: http://www.nbcwashington.com/news/health/NATL-ACA-328-Averag... http://www.forbes.com/sites/matthewherper/2013/12/05/obamaca...

Given what has been happening with Medicaid, I don't see this a temporary phenomenon.

geetee2• 12 years ago

Can someone please explain what a "distressed baby" is in this context? And why did AOL foot a million dollar bill for each and then blame the mothers?

selmnoo2• 12 years ago

Because he's an asshole with a long and illustrious history of doing shit like this?

I'm just really sad that we, the programmers and engineers, keep letting people like him climb up the ladder.

a3n4• 12 years ago

We, the programmers and engineers, have absolutely no say in the matter. If you wanted that influence you should have been an MBA. We're Morlocks.

pgrote• 12 years ago

It may relate to prematurity. The cost of hospitalization of a premature baby can be 500K to 1.5 million on average given a 20-40 day stay in the NICU.

AOL's insurance would cover it and rates might rise slightly, but it is disingenuous to blame the women.

AOL might be self-insured, but I doubt it.

geetee2• 12 years ago

"You can only have health insurance until someone actually needs to use it."

What a shitty company.

riggins• 12 years ago

Lots of possibilities. A premature birth. An congenital heart defect. etc.

Also, my read is that Armstrong thought he was going to sound like a great guy ... doing everything they could to help the distressed babies.

vikas56782• 12 years ago

I should point out however, that this 401K match at the end of year practice is already a standard at IBM, which is probably the worst place to work at in the Silicon Valley today.

throwawayandrun• 12 years ago

...plus nowadays IBM only starts matching after a full year of employment. Worst-case scenario, you could work 1,99 yrs and get nothing.

ryguytilidie• 12 years ago

It's pretty distressing to me that these people are like "eh, I'll just cut a few million in benefits for ALL MY EMPLOYEES, blame obamacare and pocket it myself." Because we need to get people angry at the idea that their fellow man is getting adequate healthcare!

andzt2• 12 years ago

We have had similar discussions in our own company, which is much much smaller than AOL. It's definitely not directly caused by Obamacare, but we've watched healthcare costs significantly rise over the last few years. And it's mostly these "catastrophic" cases - major surgeries, expensive pregnancies etc. We are try to figure out how we can continue offering great benefits but we'll probably have to make a change. Not to save our billion dollar profits (I wish), but so we can continue to function as a company and employ some great people...

jbooth7• 12 years ago

Health insurance costs rose by 131% from 1999-2009[1], which comes out to just under 9% inflation. That's in comparison to an average 2.5% inflation for all goods including healthcare since 2000[2]. 2.5% inflation turns $100 into $128.01 over 10 years. Instead, we got 231.

About 10 years ago I was in local government, we laid off teachers every single year in order to keep paying health insurance premiums for the rest of them. More money for less bodies.

[1]http://business.time.com/2009/09/16/health-insurance-premium...

[2]http://inflationdata.com/Inflation/Inflation_Rate/Long_Term_...

(edit: fixed my numbers thanks to twoodfin)

sentenza• 12 years ago

This is why all the functioning welfare states have healthcare systems that are in large part state-run. I'd go as far as to say that privatization of health care and bundling health care with employment only ever make things worse.

Health care is an issue where you _cannot_ ignore the low-probability worst case scenarios but instead must always be ready to respond to them. So the bigger the group of people that are insured together, the better, which obvious leaves one scenario as best: Every citizen of a state pays into and recieves from one single health care pool.

Anyway, I wish you best of luck. I hope you find a way to make things work.

kilocycling• 12 years ago

The worst part might be him putting part of the blame as an aside to the women with "distressed babies." It seems awfully small for a CEO of a Fortune 1000 to pin this cost-cutting decision, even partially, on two people.

ceautery2• 12 years ago

The video did not include any comments about million dollar babies. It did show him saying a 3% match on 401k is a great deal... which it isn't.

FireBeyond2• 12 years ago

Tell that to the very vast majority of Americans who work their entire lives without "employer matching" on their 401k's...

Or a smaller but not insignificant number for whom a 401k at all is something dreamt of.

ceautery2• 12 years ago

OK. Dear vast majority....

Actually I'm in that boat, too, but of my own doing. At where I work (a large utility in the midwest), we match 75 cents on the dollar up to 6%, so essentially 4.5%. I stopped contributing a few years back to try to get out of debt faster, but kept finding creative ways to add new expenses: wife, new daughter, another new daughter, repair that leaky roof, etc.

Still, my point was obvious: 3% is free money that shouldn't be turned down if it's available, but to laud it as something to brag on is really grasping at straws. 6% was the industry standard in my area... and I once worked for a company AOL bought out.

pmorici• 12 years ago

The distressed babies thing is bizarre since when does a company have to pay extra out of pocket for something like that like Armstrong is claiming? Isn't that the whole point of Insurance, in case something bad happens insurance pays?

pyre• 12 years ago

More like the cost of that company's plan goes up, but I somehow doubt a company as large as AOL has significant cost increases due to a baby or two that had some special surgeries.

Agathos• 12 years ago

Most large companies self-insure. They just hire a "health insurance" company to administer the plan.

andrewtbham• 12 years ago

a company i worked for self-insured, but they did have insurance that kicked in at a very high level.

mortov• 12 years ago

Wow ! Obviously sexual discrimination and workplace bullying are in favor at AOL.

Seriously, this sounds like another 'top notch tough businessman' appointed at immense salary.

My experience has been the first person normally claiming they are top notch is none other than themselves, and otherwise prosperous companies with generally good prospects seem to bleed money shortly after their arrival (normally into their pockets) and end up as burned out shells being sold off piecemean with some golden parachute to the outgoing top notch guy before he repeats the performance or retires to a recently purchased, by a tax haven based company, island in the Carribean.

And as proof of true sexual equality, there are examples where the he is a she.

FireBeyond2• 12 years ago

Of course. The entire company's "hit" from the ACA (I'm making myself a pact now to refuse to call it "Obamacare" again) could have been covered by half of his salary ($12MM before bonuses or stock options).

lxt• 12 years ago

Wow. A billion dollars in profit, 12 million in his pocket each year...but the 7 million for health care has to come out of the employees' other pocket.

Also, the fact that he's blaming two babies - I find it highly unlikely, statistically, that two such cases blew the cost of premiums for a group as large as AOL. I'm pretty sure they had more employees with cancer that year, for example, and that's also super-expensive.

This guy is despicable.

gum_ina_package2• 12 years ago

He's not blaming two babies, he simply stated that unforeseen events caused the company's healthcare costs to go up unexpectedly.

rgrieselhuber• 12 years ago

Still disgusting to parade two specific examples like that.

727374• 12 years ago

Sounds to me like he's blaming the babies or else he could have left them out of it and said something like 'exceptional events'.

abarringer• 12 years ago

On a group the size of AOL statistics would clearly imply at least two expensive cases per year. To single those cases out is inexcusable.

In 2000 I worked at a relatively small company of 50 employees. One person had a baby that cost millions sic. Being a small group we all knew who it was and anticipated our insurance rates increasing.

Our rates went up some but not much, and the company president decided to cover 100% of the increase. I greatly admired the company for doing that and now 14 years later I find myself working with the same team on a new startup. The company president has been able to get back most of the top talent from a decade ago because we all respect and admire his leadership.

nsxwolf• 12 years ago

He didn't have to say what those events were. Now everyone in the office knows who is "responsible" for these cuts - two poor parents with sick babies. There was no reason for the CEO to create this kind of resentment for those parents.

eterm• 12 years ago

Even if the two babies did have a significant impact, it's utterly disgusting to parade them as an excuse for cutting benefits.

lmg643• 12 years ago

it's small-ball management, certainly not appropriate for a firm of their size and stature.

we've seen some crazy unprofessional behavior from armstrong before - the spot firing conference call is also classic amateur hour. not a good sign for AOL.

jbattle• 12 years ago

A) How did AOL end up paying "a million dollars each" if they have insurance? B) Everyone close to those parents would know who they were. A baby in the hospital is something that people hear about. So now those parents get to feel singled out, guilty, blamed, etc. for "screwing things up" for the rest of the company.

What an ass

gcb03• 12 years ago

Unless they are in the group that collected 401k monthly and left to another employer ;)

TonyCoffman• 12 years ago

Like many companies - they are likely self-insured. If that is true, then they pay the actual costs of the claims right out of their pockets rather than participating in a larger risk pool.

I agree - it's completely disgusting to bring these costs up in that context.

andzt2• 12 years ago

Agree with you on the ass part. But to give you some information:

A) AOL most likely self-insures... Why? Exactly because of catastrophic events like this increasing your premiums for all of your thousands of employees, even though most of them are probably healthy and low risk. Insurance companies don't care! It's usually better to self-insure until you run into these catastrophic insurance events. B) Agreed. It's disgraceful for any executive of any company to publicly share any type of individual insurance information. Also, borderline illegal.

joyeuse67013• 12 years ago

The company isn't a church or a charity or an example of excellent morality. It is for profit. There are places to work that offer no benefits mind you. Somewhere along the lines people ought to realize that their negative reactions from this stem from two things: Going from more to less bothers people. Someone who has more than others taking more those with nothing also, bothers people. If employees (those two babies by proxy) are costing the company more (big assumption if that is the case), it makes a lot of sense to adjust employee related costs to compensate for such events, as opposed to re-appropriating the money from somewhere else despite what your sense of morality dictates.

I find it equally hilarious that everyone blames the 'singling out' as the criminal act here. Singling out only works if the mob (other AOL employees) actually target those two women, and how fucked up would that be? Are you really going to ignore the employees moral responsibilities to not target women with children in need but call out only the CEO?

French revolution mentality.

gopher1• 12 years ago

Guys, there are worse places to work with no benefits, therefore anything that AOL does is morally A-OK so long as they're higher than the ridiculously low bar of current employment standards.

And hey, this is a for profit company, therefore they have no moral obligation to do anything other than make a profit. In fact they should refuse all healthcare obligations, remove pensions and outsource all their employees to gain more profits. There's absolutely no societal obligation toward a populace on a corporation's behalf. The company just pulled themselves up by their bootstraps and didn't benefit from society to get where they are today at all.

VikingCoder• 12 years ago

Please tell me where you work, so I can make sure to never work there.

One of the best ways for-profit, high-tech companies maintain profitability is to ensure that they have happy workers.

This is dumb, all-around: it doesn't save much cost, and it creates animosity.

gum_ina_package2• 12 years ago

To everyone who's saying "they make X billions in profit each year and can't afford Y million!", that's not the point. It'd be irresponsible of him to simply eat the extra costs. Hopefully, people wake up and realize what a horrible law Obamacare is and demand it be repealed.

astrodust• 12 years ago

What is wrong with you? Are you suggesting AOL employees should be paid minimum wage?

a3n4• 12 years ago

Less. Federal interference in wages is an abomination. /s

thrownaway2424• 12 years ago

I doubt that person supports the minimum wage law.

GoogleCoder• 12 years ago

Fuck you prick. Eat a dick you fucking shit faced republican. Your kind are the scum of this earth.

gdulli3• 12 years ago

Take this kind of shit back to reddit, please. There's no excuse for escalating a difference of opinions like this.

thedaveoflife• 12 years ago

Obamacare: the perfect scapegoat for large companies trying to cut costs.

dgbsco• 12 years ago

As an AOL employee, this news and other internal news really, REALLY makes me want to reconsider my options.

bobjordan• 12 years ago

From my view, this is a case where random big box mgt consulting firm (McKinsey, PWC, Booz) found some loose cash on $xM engagement.

Tim then publicly regurgitated much of the internal deck logic. Obamacare may have been his own (questionable) addition - but the two distressed babies was definitely in the deck.

Whichever consulting firm it was obviously need's to coach those CxO's better on implementation.

thrillgore• 12 years ago

And here I was being sympathetic to "healthcare problems" until he threw those two mothers under the bus with that backhanded remark. Has this guy shown no class while at AOL?

I'd like to think AOL has made a meteoric turnaround with HuffPost and Patch especially (the content is better than the local papers in my suburban hellhole, which isn't saying much) but maybe I spoke too soon.

ScottWhigham• 12 years ago

It disappoints me to read the knee-jerk reactions here by those who obviously have not gone through childbirth. To help some of you along, a "distressed baby" would be his way of saying that the mother or baby experienced trauma or were under life-threatening duress either during childbirth or prior. This is not that unusual - things like umbilical cords wrapped around a neck, a small birth canal, and other reasons can cause significant problems during childbirth. How many millions of women and babies have died during childbirth? Half of the commenters here are acting as though childbirth is always a safe process.

The guy used a term that the writer of the article took offense to and you guys are making a huge deal of it. Get over it. Imagine yourself having to tell the same story to 100 reporters 100 times over two days. You'd try different ways of saying it and, no doubt, at least one of those times you'd use a word or phrase you wished you could take back.

If you're unhappy that he's bitching about paying for healthcare, fine - let that be why you complain. But stop falling for the buzzfeed/linkbait BS titles and "tricks" that authors use to try to make stories facebook-worthy.

phillmv• 12 years ago

It's not about whether the babies are having a bad time, it's about the breach in privacy involved in referring to the health issues that two of his employees underwent, and directly blaming them for the health premiums.

nitrogen2• 12 years ago

From what I've read, people who have to tell once.the dame story 100 times over two days are supposed to have a list of talking points that they memorize and refuse to deviate from the list, and/or hold a press conference to tell everyone at once.

GuiA• 12 years ago

"For employees leaving to go to other employers, not matching those programs was probably the last thing on the list for us in terms of employee benefits that we wanted to keep."

I can't imagine what must be at the top of the list if "no healthcare" is a the bottom.

Sounds like even the CEO agrees that AOL is a shitty, shitty place to work for.

sebnukem2• 12 years ago

Someone at work gave me her email address, and it was an AOL address. I felt like I had discovered a new living fossil, still in her thirties (guessing).

And that's how I know that AOL, somehow, is still kicking.

uptown• 12 years ago

What right does Mr. Armstrong have revealing private medical details about policy-holders to the public?

robodale• 12 years ago

If I was a woman working there...I would GTFO. Hell, if I was any female/male/other working there, I would GFTO.

karmelapple• 12 years ago

If you'd like to let him know what you think about this, be sure to check him out on twitter @timarmstrongaol

https://twitter.com/timarmstrongaol

cfesta9• 12 years ago

I love how he starts the video posted in the article off with "We are in the most intense talent space in the world" Well good sir don't expect to keep any of that talent. This sickens me.

flashgordon• 12 years ago

On a semi-related note, what makes fetal distress cost a million dollars to recover from? I would have thought by now this should have been part of every pediatricians runbook. I am not any where savvy with medicine and also apologize in advance if this sounds insensitive. That is not my intention. I am curious as to what would make these costs be so high.

dougabug• 12 years ago

Why would anyone with career options choose to work for AOL? He might as well have posted a billboard declaring, "Top talent not wanted."

AOL chief cuts 401k benefits, blames Obamacare and two “distressed babies”

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