
AOL chief cuts 401k benefits, blames Obamacare and two “distressed babies” - rsobers
http://www.washingtonpost.com/blogs/wonkblog/wp/2014/02/06/aol-chief-cuts-401k-benefits-blames-obamacare
======
lxt
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_package
He's not blaming two babies, he simply stated that unforeseen events caused
the company's healthcare costs to go up unexpectedly.

~~~
727374
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'.

~~~
bilbo0s
That's EXACTLY what he should have done.

He should have said, "The cost of our medical benefits package was higher than
expected." FULL STOP.

I can't, for the life of me, see how anyone could possibly think what that man
did was appropriate.

------
givehimagun
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](https://en.wikipedia.org/wiki/List_of_acquisitions_by_AOL)

~~~
bilbo0s
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.

~~~
gcb0
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.

~~~
bilbo0s
What do you mean?

The entire REASON we're outraged is because we REALIZE it was nothing more
than political! If that is a technique they teach... all I can say is that it
doesn't work very well here on HN. Benefit cuts for political action has lost
A LOT of support around the tech industry today.

~~~
gcb0
because AOL has all of hacker news audience. i cant stand all the threads here
everytime aol sites have any downtime...

but you are missing the point. your words say you are not even condoning the
political move anymore because now you are outraged by the asshole baby
comment.

so, the baby comment served its purpose.

------
ryguytilidie
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!

~~~
andzt
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...

~~~
jbooth
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...](http://business.time.com/2009/09/16/health-insurance-premiums-
up-131-in-last-ten-years/)

[2][http://inflationdata.com/Inflation/Inflation_Rate/Long_Term_...](http://inflationdata.com/Inflation/Inflation_Rate/Long_Term_Inflation.asp)

(edit: fixed my numbers thanks to twoodfin)

~~~
twoodfin
_Healthcare costs have averaged ~15% inflation since the 90s._

Not even close[1].

CAGR of U.S. health care expenditures 1990-2012: 6.05%

CAGR of U.S. health care expenditures 2000-2012: 5.59%

And that's total spending, not accounting for population growth.

Health care expenditures have grown faster than inflation, but not anywhere
near 15% annually.

[1] [http://www.cms.gov/Research-Statistics-Data-and-
Systems/Stat...](http://www.cms.gov/Research-Statistics-Data-and-
Systems/Statistics-Trends-and-
Reports/NationalHealthExpendData/Downloads/tables.pdf)

~~~
nitrogen
Healthcare expenditure is not the same thing as price of insurance.

~~~
twoodfin
I don't understand what you're suggesting. If insurance costs were rising at
~15% annually while total expenditures were rising at ~6% annually, you'd
expect to see insurance administration/profits become the #1 expenditure in
short order. But per the CMS data I linked, those were only 6% in 2012 ("Net
Cost of Health Insurance").

~~~
jbooth
Why's it have to come out as profits? Couldn't they just be a big lumbering
bureaucracy that never gets cut because they never have pricing pressure?

Paying a bunch of idiots to run around and generate paperwork isn't
profitable, but the money's still gone.

[http://business.time.com/2009/09/16/health-insurance-
premium...](http://business.time.com/2009/09/16/health-insurance-premiums-
up-131-in-last-ten-years/)

Healthcare premiums up 131% in 10 years.. that comes out closer to 9% than 6%.
And doesn't include co-pays or anything that insurance doesn't cover.

EDIT: For the record, this kind of industry BS is why liberals support single-
payer healthcare. It's not that we're commies or even that we don't understand
the inefficiency of government bureaucracy. It's that we'd prefer the dumb
public bureaucracy to our current even dumber private bureaucracy. Something
being 'private' without pricing pressure isn't capitalism.

~~~
twoodfin
_Why 's it have to come out as profits? Couldn't they just be a big lumbering
bureaucracy that never gets cut because they never have pricing pressure?_

Sure, but that would show up in the CMS numbers, and it doesn't.

Insurers are absolutely price-conscious, both of what they pay for and what
they charge. It's not as if businesses will accept year after year double
digit increases without shopping around. If there were big money to be made
undercutting existing insurers, someone would go after that market, but there
isn't: Health insurance profit margins are low single digits at best.

------
pmorici
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?

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

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

------
protomyth
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.

~~~
jbooth
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
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...](http://www.nytimes.com/2013/08/21/business/survey-finds-modest-rise-
in-health-insurance-premiums.html?_r=0)

~~~
protomyth
Your pointing to an article based on a Kaiser Family Foundation survey of
employers for 2013 without any guidance on 2014 when the ACA changes occur for
businesses. A study about a year that the ACA doesn't affect the group being
studied is not very informative.

study: [http://kff.org/private-insurance/report/2013-employer-
health...](http://kff.org/private-insurance/report/2013-employer-health-
benefits/)

~~~
jbooth
Is the national review less biased?

[http://www.nationalreview.com/corner/353475/slowdown-
health-...](http://www.nationalreview.com/corner/353475/slowdown-health-care-
inflation-here-stay-veronique-de-rugy)

~~~
protomyth
Its not the bias, its the timing - you are using numbers under one system to
prove numbers under a future different system. If anything, these numbers show
that the ACA wasn't needed as it came into effect years after in passed. Look
at the implementation dates to ACA and see what years the data in the graph is
for.

Also, article points to same [http://kff.org/health-costs/issue-
brief/assessing-the-effect...](http://kff.org/health-costs/issue-
brief/assessing-the-effects-of-the-economy-on-the-recent-slowdown-in-health-
spending-2/) \- same group

------
mortov
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.

~~~
FireBeyond
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).

------
ScottWhigham
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.

~~~
nitrogen
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.

------
geetee
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?

~~~
selmnoo
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.

~~~
a3n
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.

~~~
mattgreenrocks
But the need to professionalize is way overdue:

[http://michaelochurch.wordpress.com/2012/11/18/programmers-d...](http://michaelochurch.wordpress.com/2012/11/18/programmers-
dont-need-a-union-we-need-a-profession/)

------
vikas5678
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
...plus nowadays IBM only starts matching after a full year of employment.
Worst-case scenario, you could work 1,99 yrs and get nothing.

------
roderick3427
I wouldn't have expected this sort of behavior from a big tech company like
AOL.

~~~
timje1
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.

~~~
gdulli
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?

~~~
selmnoo
It's not that they're "leaving it up to its customers to be responsible", it's
strategically employing black patterns to exploit specific mistakes people
make.

Are you 100% on top of your every bill? Do you know everything going in and
going out of your bank account? Have you made any mistakes in looking over
something? My friend's dad is a CFO of a Fortune 500 company (and is a
generally well-reputed guy) - I recently found out that he's pretty bad at
managing his home finances - forgets to pay credit bills and all that.

This shit just happens. I'd rather that I deal with a company that doesn't try
to actively exploit me on my weaknesses. The companies that do this have a bad
character and I wish they just didn't exist.

~~~
gdulli
> Are you 100% on top of your every bill?

If I wasn't, I sure wouldn't blame anyone but myself for it. I wouldn't blame
the company I willingly gave money to due to my own oversight. And I wouldn't
be surprised if they didn't call me and ask me to stop paying them.

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

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

------
bobjordan
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.

------
ceautery
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.

~~~
FireBeyond
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.

~~~
ceautery
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.

------
thrillgore
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.

------
flashgordon
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.

------
GuiA
_" 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.

------
karmelapple
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](https://twitter.com/timarmstrongaol)

------
cfesta9
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.

------
sebnukem2
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.

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

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

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

------
a3n
Nut.

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

~~~
thrownaway2424
I doubt that person supports the minimum wage law.

