KHN Morning Briefing

Summaries of health policy coverage from major news organizations

After Uproar About Obamacare Remarks, AOL Reverses 401(k) Policy

News outlets reported that the company blamed the law and the health costs of two "distressed babies" for a significant change in how it matches 401(k) contributions.

The Washington Post: AOL Chief Reverses Changes To 401(k) Policy After A Week Of Bad Publicity
AOL chief executive Tim Armstrong e-mailed employees Saturday evening that he was reversing the company’s 401(k) policy and apologized for his controversial comments last week. “The leadership team and I listened to your feedback over the last week,” wrote Armstrong in his e-mail to the company. "... we have decided to change the policy back to a per-pay-period matching contribution.” The decision came after days of pressure on the company, after many employees were angered by a report by The Washington Post that retirement benefits were being changed (Yang, 2/8).

Capital New York: AOL Reverses Decision On 401(k) Matching After Outcry
That decision started to gain notoriety as Armstrong made television appearances linking the decision to Obamacare and, later, in a staff-wide conference-call meeting, mentioning two employees' difficult pregnancies and neonatal care needs as having cost the company too much money, requiring the adjustment. ... Read the memo reversing the 401(k) decision below: ... "On a personal note, I made a mistake and I apologize for my comments last week at the town hall when I mentioned specific healthcare examples in trying to explain our decision making process around our employee benefit programs" (Pompeo, 2/8).

The New York Times: Facing Criticism, AOL Chief Reverses Change to 401(k) Plan
Numerous AOL employees were displeased that Mr. Armstrong had singled out two co-workers, although without mentioning their names. His comment drew substantial attention and criticism on social media. Deanna Fei, the mother of one of the babies, whose husband works for AOL, wrote a first-person account for the online magazine Slate that described her daughter’s harrowing birth and her own anger over Mr. Armstrong’s remarks (Kaufman, 2/9).

The Wall Street Journal: AOL Chief Reverses Changes to Benefits Policy
Health-care costs don't directly affect company spending on retirement benefits, employment experts say. However, companies often consider them in tandem, says Bill O'Malley, a compensation and benefits attorney in the national tax practice of McGladrey LLP. Health costs for women outpace those for men starting in the late teen years, according to a June 2013 report from the Society of Actuaries. Male costs eventually rise, but the gap remains large in the early 30s—with women consuming more than twice as much health care in dollar terms than men, a difference generally attributed to pregnancy and natal care. The gender costs even out around age 60, according to the report (Launder, 2/8).

Reuters: Backlash Hits AOL CEO After 'Distressed Babies' Remark
Armstrong's comments on Thursday during a company town hall meeting about why it was cutting 401(k) contributions ... After the town hall, Armstrong sought to clarify his remarks in a memo to AOL's 5,000 employees. "I discussed the increases we and many other companies are seeing in healthcare costs," he wrote. "In that context, I mentioned high-risk pregnancy as just one of many examples of how our company supports families when they are in need. We will continue supporting members of the AOL family" (Saba and Richwine, 2/7).

USA Today: Reports: AOL Reverses Position On Year-End 401(k) Match
A year-end lump sum 401(k) match from your employer has a nice ring to it --unless you change jobs earlier in the year. Employees that exit a company before year-end could lose out on the cherished corporate match, a key pillar of 401(k) savings plans ... Armstrong had told CNBC the year-end strategy was to offset higher costs related to the new Affordable Care Act (Shell, 2/8).

The Atlantic: AOL's Million-Dollar Distressed-Baby Claim: Could It Possibly Be True?
AOL has more than 5,000 employees, and companies of that size are usually self-insured. ... employees' premiums go to the employer, who uses them to pay for medical expenses the workers incur during the year. The goal, if you're CEO, is for the amount you collect from your employees to be slightly more than the cost of all of their medical expenses added together. ... the cost to the company might have been around $100,000—a far cry from the million-dollar-a-baby figure Armstrong gave. ... [But] let's say these mini-AOLers were way worse off than a standard premature baby. Let's assume they needed weeks in the intensive care unit and lots of expensive procedures. The cost might still have been totally negligible for AOL. ... Companies that choose this route usually re-insure themselves to guard against big losses, such as million-dollar babies (Khazan, 2/7).

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