AOL chief cuts 401(k) benefits, blames Obamacare and two “distressed babies”(washingtonpost.com)
washingtonpost.com
AOL chief cuts 401(k) benefits, blames Obamacare and two “distressed babies”
http://www.washingtonpost.com/blogs/wonkblog/wp/2014/02/06/aol-chief-cuts-401k-benefits-blames-obamacare/
14 comments
>I'm surprised the company (not the insurance) had to pay that much for the babies medical bills.
my understanding that AOL self-insures for medical.
my understanding that AOL self-insures for medical.
Is the actual medical care so much more expensive in the US than in Europe? I'm not talking about the insurance system or anything like that, I'm talking about the actual hospitalization cost.
My twins spent six weeks in NICU in a large hospital and then three more in a smaller regional hospital. The actual hospitalization cost for the NICU stay was about €25k each. Granted, there were no complications, but I can't imagine how even with multiple surgeries how you can add that up to a million dollars.
My twins spent six weeks in NICU in a large hospital and then three more in a smaller regional hospital. The actual hospitalization cost for the NICU stay was about €25k each. Granted, there were no complications, but I can't imagine how even with multiple surgeries how you can add that up to a million dollars.
Yup. Coming from Europe as well, I was shocked by the cost of healthcare (even when insured) in the US. Random googled link with graphs to give you an idea: http://www.huffingtonpost.com/2013/10/03/health-care-costs-_...
There are things you tally in the back of your mind as costs -- like, for example, a couple of outliers in the health benefit cost spreadsheet that correspond to newborns with urgent medical needs -- and then there are things you kinda-sorta bring up to the media as having caused you to cut benefits back.
It doesn't reflect too well on this guy's people skills if something in his brain didn't say, "I'm about to blame sick children for cutting my employees' benefits, maybe I should shut up."
It doesn't reflect too well on this guy's people skills if something in his brain didn't say, "I'm about to blame sick children for cutting my employees' benefits, maybe I should shut up."
"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," said Armstrong
AOL does something like $2 billion in revenue per year. This cost would have been a fraction of one tenth of one percent of revenue. What. a. shithead.
AOL does something like $2 billion in revenue per year. This cost would have been a fraction of one tenth of one percent of revenue. What. a. shithead.
He's saying he's cutting 401K matching for people who leave the company during a given year so that the company can continue paying for extraordinary medical costs for its employees.
It's a tradeoff, and morally it looks like the right one to me. Pay less to people who left to the company so you can continue paying more in health benefits to those who remain.
It's a tradeoff, and morally it looks like the right one to me. Pay less to people who left to the company so you can continue paying more in health benefits to those who remain.
They aren't in a position where they actually need to choose one or the other. They can do both. Your position (penalize people for leaving before year end) will hurt the company. The article mentions the financial losses for both the people that leave (for a multitude of reasons), and the financial loss for those who stick around. But it's also a destruction of a very useful benefit that should help the company be competitive in hiring. 401k matching is one of the major tradeoffs people use for determining which job to take (or stay at). Now AOL is telling prospective employees: You'd better be loyal or we'll screw you over.
The financial loss for missing out on compounding of the matching funds for few months is likely much lower than the financial loss of passing on the increased cost to the employees.
That was the choice being made here.
That was the choice being made here.
Unless you leave on Jan 1st you will be "screwed over" even if you worked there for [long time]. Knowing that before you even start when you leave you will be taking a hit stinks.
Actually, this ruins 401k plans for folks who stick with the company too. Employees miss out on all the compounding throughout the year from the contributions.
From WaPo:
"In other words, employees will have to stay through the end of the year to get the match, and then the contribution won't even come during 2014. In a year like last year, where the stock market was roaring, the difference for an employee who left in December could amount to thousands of dollars in pay and added savings."
http://www.washingtonpost.com/blogs/wonkblog/wp/2014/02/04/a...
From WaPo:
"In other words, employees will have to stay through the end of the year to get the match, and then the contribution won't even come during 2014. In a year like last year, where the stock market was roaring, the difference for an employee who left in December could amount to thousands of dollars in pay and added savings."
http://www.washingtonpost.com/blogs/wonkblog/wp/2014/02/04/a...
Not just the compounding, but also the spreading of risk, if I understand well. Which is the point with any kind of conservative pension plan.
He's also touting record profits. The morally correct decision is to do both.
Blaming this on distressed babies is disgusting.
What if he's trying to humblebrag?
... And would be fully insured. That's literally the reason why insurance exists.
Old style, hired gun, selfish, cost-cutter CEO with absolutely no original ideas, or any clue how to turn the company around. It appears AOL's corporate culture is as out of date as their products.
Why would anyone voluntarily work with someone who's obviously such a shitty human being? The board of directors must be as bad at their jobs as he is.
Why would anyone voluntarily work with someone who's obviously such a shitty human being? The board of directors must be as bad at their jobs as he is.
Here's the thing, it's a hot market, if you work at AOL, just walk out the door. It's Feb so you're not missing much contribution.
Or calculate how much you lost by the decision and go ask for a raise for 4 times as much. Tell them you gave $100 to someone down the street because their baby was sick and so now you need more money because your wife doesn't like the way the quarterlies are going to look after you spent $200 million at the bar getting drunk.
Or calculate how much you lost by the decision and go ask for a raise for 4 times as much. Tell them you gave $100 to someone down the street because their baby was sick and so now you need more money because your wife doesn't like the way the quarterlies are going to look after you spent $200 million at the bar getting drunk.
This is why both healthcare and benefits from employment beyond cash and salary are many times bad. Companies should have no part in your healthcare/insurance, retirement savings or any other private aspect beyond reimbursing you for costs. I think independent pools of healthcare is the only way, outside of a company, wider nets with less impact.
This seems more like a political statement than an actual explanation.
Armstrong pissed away $200 million on Patch, and is still blaming the $7.1 million in Obamacare costs for reducing employee benefits.
Armstrong pissed away $200 million on Patch, and is still blaming the $7.1 million in Obamacare costs for reducing employee benefits.
The worst thing about a struggling company is the petty, demoralizing measures management takes to cut costs. Save a few million in 401k costs but waste eight figures in decreased productivity, increased employee turnover, and lower morale overall. This seems shortsighted.
I completely agree with you. If I were an employee of AOL, I'd personally start looking for a way out.
When a CEO of a company becomes so petty as to point out the medical problems of a few employees (exactly two), he deserves zero respect or loyalty from his employees.
When a CEO of a company becomes so petty as to point out the medical problems of a few employees (exactly two), he deserves zero respect or loyalty from his employees.
I'm confused as to how this will actually save them any money over time. Won't it just encourage everyone who wants to quit to wait until the 401k payout date to the extent possible and then do it all at once?
They could fire a lot of people before the end of the year...
People don't always optimize. I've known two people in this situation who left money on the table. Even if you quit on Jan 30'th, that's one month of money left on the table.
The worst part is it doesn't appear to be struggling, but the CEO painted the only two options of dealing with $7M in increased healthcare cost as either passing it on to the employees, or decreasing some benefit.
If management is going to do something to anger the workforce, it's in their interest to get workers angry at each other instead of management.
No, it's really not.
I feel for those poor women whose colleagues probably know about their "distressed" babies.
Luckily, thanks to "Obamacare" they can leave AOL and know they will be able to have affordable insurance.
They will be able to get insurance, but it won't be affordable.
As always, the cost will depend on whether the insured or their s.o. is employed, and what's been negotiated by the employer. The only thing that the Affordable Care Act ensures is that an insurance company can't deny insurance. If you're on your own you're still screwed.
In general, if a law like the Affordable Care Act, or a product, has an adjective in its name, you won't find that adjective anywhere in the law or product except right there, in the name.
In general, if a law like the Affordable Care Act, or a product, has an adjective in its name, you won't find that adjective anywhere in the law or product except right there, in the name.
> The only thing that the Affordable Care Act ensures is that an insurance company can't deny insurance. If you're on your own you're still screwed.
Where are you getting this stuff? It ensures a lot more than that... Coverage minimums, no policy maximums, pre-existing condition coverage, free annual checkups, etc etc. Pricing is also fixed within age groups except for smoking (which comes at a standard premium to your age group).
Another part is guaranteed affordability based on income. If you don't make a lot of money or live in an area where the plans are higher cost you will quality for a subsidy which brings the price down to an affordable level. If you make a lot of money the good news is the plan is already affordable.
Before the ACA I could only get a high-deductible plan that never covered a single thing in the half dozen years I had it. It would have been handy if I had gotten hit by a bus, but I would run into problems even then because it had a maximum policy outlay and they had the ability to drop me (then leaving any remaining medical problems as a "pre-existing" condition for a future insurer). The only good part about it was the Health Savings Account that allowed me to pay the exorbitant rates for medical care with pre-tax money. Without a subsidy I'm paying about the same now (hard to do an exact comparison without the HSA), but I can actually use the insurance. It won't be $150+ every time I walk into a doctors office, eye clinic, dentist or pharmacy.
Where are you getting this stuff? It ensures a lot more than that... Coverage minimums, no policy maximums, pre-existing condition coverage, free annual checkups, etc etc. Pricing is also fixed within age groups except for smoking (which comes at a standard premium to your age group).
Another part is guaranteed affordability based on income. If you don't make a lot of money or live in an area where the plans are higher cost you will quality for a subsidy which brings the price down to an affordable level. If you make a lot of money the good news is the plan is already affordable.
Before the ACA I could only get a high-deductible plan that never covered a single thing in the half dozen years I had it. It would have been handy if I had gotten hit by a bus, but I would run into problems even then because it had a maximum policy outlay and they had the ability to drop me (then leaving any remaining medical problems as a "pre-existing" condition for a future insurer). The only good part about it was the Health Savings Account that allowed me to pay the exorbitant rates for medical care with pre-tax money. Without a subsidy I'm paying about the same now (hard to do an exact comparison without the HSA), but I can actually use the insurance. It won't be $150+ every time I walk into a doctors office, eye clinic, dentist or pharmacy.
I stand corrected. I look forward to my affordable care when I have to buy on the open market.
Yes it will. Regardless of what you consider affordable, it will cost much less than before the ACA because of their "pre-existing" condition (a child with medical issues). It's likely they wouldn't have been able to get coverage at all before the ACA.
tl;dr: Tim Armstrong is a sociopath. AOL is a terrible place to work. Take your skills elsewhere.
We just saw that big tech firms collude to hold down employee pay! See https://news.ycombinator.com/item?id=1699529
That means, in effect, there's only one employer in the tech industry. So the labor market in tech is not an example of a perfectly competitive market. It actually follows a monopsony model.
In a monopsonistic labor market, raising wages/benefits doesn't reduce employment, it actually increases employment, increases output and lowers prices...all good things! See my comments here for a fuller explanation: https://news.ycombinator.com/item?id=7185717
Therefore, Obamacare did not hurt the tech labor market. Tim Armstrong is full of $hit. They should take away his degree in economics if he really believes his own bullcrap. He was just covering his own a$$. Maybe what's hurting his employees, stockholders and customers is his own overblown $3,216,534 salary in 2011. Source: http://www.forbes.com/profile/tim-armstrong/
That means, in effect, there's only one employer in the tech industry. So the labor market in tech is not an example of a perfectly competitive market. It actually follows a monopsony model.
In a monopsonistic labor market, raising wages/benefits doesn't reduce employment, it actually increases employment, increases output and lowers prices...all good things! See my comments here for a fuller explanation: https://news.ycombinator.com/item?id=7185717
Therefore, Obamacare did not hurt the tech labor market. Tim Armstrong is full of $hit. They should take away his degree in economics if he really believes his own bullcrap. He was just covering his own a$$. Maybe what's hurting his employees, stockholders and customers is his own overblown $3,216,534 salary in 2011. Source: http://www.forbes.com/profile/tim-armstrong/
Sounds like he just hurt his company's prospects for hiring quality employees here in the DMV area with that crap explanation.
Tim Armstrong already has a reputation as being a bit of a jerk: https://news.ycombinator.com/item?id=6197081
Previously, though, he was head of advertising at Google (1999-2009), and I don't remember him causing much negative publicity in that role.
Previously, though, he was head of advertising at Google (1999-2009), and I don't remember him causing much negative publicity in that role.
It's not often someones actually makes my skin crawl.
I had a friend die to leukemia a year ago (she had just turned 27). 6 months prior to that, her first month in Stanford Hospital for chemo led to a bill to the insurance on the order of one million dollars.
I don't know how much the insurance billed the company (a small one without AOL's income), but they upheld it.
Tim Armstrong is the same CEO who last year fired Abel Lentz, chief creative officer of Patch, on the spot during his company-wide layout call [1]. I'm inclined to label him a Gordon Gekko-level psychopath.
[1] http://www.forbes.com/sites/susanadams/2013/08/14/aols-chief...