By Igor Volsky on
February 6, 2014 at 4:18 pm
AOL Chairman and CEO Tim Armstrong blamed
the babies of two employees for increasing the company’s benefit costs
on Thursday, explaining in a conference call that AOL had to pay
millions out in medical bills and alter its entire benefits package. The
remarks came just hours after the company announced changes to its 401(k) plans and complained that Obamacare has increased costs by $7.1 million.
“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.” Under the
new program, 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.
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
Meanwhile, the company is also hurting from poor business decisions.
As the Washington Post reports, its 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
AOL’s total revenue beat expectations and increased $679 million in the fourth quarter. In 2012, Armstrong earned 12.1 million.