Issue of the week: AOL’s million-dollar babies

AOL’s “gaffe-prone” CEO, Tim Armstrong, “got in some hot water” last week.

AOL’s “gaffe-prone” CEO, Tim Armstrong, “got in some hot water” last week, said Tim Fernholz in He already had angered employees by announcing that the company would no longer contribute matching funds every pay period to its employees’ 401(k) retirement deductions, but rather pay a lump sum at year end—thus punishing anyone who leaves the company. Even worse was his explanation: Armstrong blamed the Affordable Care Act and more specifically two employees’ “distressed babies,” who he said cost the firm $1 million each. He’s not the first boss to make a similar argument, and as the health-care law’s provisions take hold, “the ‘Obamacare made me do it’ excuse may prove convenient among corporate executives addressing all manner of tricky challenges—price hikes, benefit cuts, layoffs.” But when they try this ploy, they should remember Armstrong “and those sick babies.’’

One of those “distressed babies” is my daughter, said Deanna Fei in Armstrong’s suggestion “that the saving of her life was an extravagant option, an oversize burden on the company bottom line” was not just ludicrous, but “a cruel violation.” Let’s ignore the fact that Armstrong took home $12 million in pay in 2012, and that AOL just reported its best financial results in years. “The hardest thing to bear has been the whiff of judgment” in his statement, as if my husband—who works for AOL—and I “selfishly gobbled up an obscenely large slice of the collective health-care pie.” When our daughter was born prematurely, we “experienced exactly the kind of unforeseeable, unpreventable medical crisis that any health plan is supposed to cover. Isn’t that the whole point of health insurance?” Now a year old and miraculously healthy, our daughter has been through enough. “Having her very existence used as a scapegoat for cutting corporate benefits was one indignity too many.”

Armstrong certainly could have been more sensitive, said Timothy Noahin, but give him credit for one thing: “honesty.’’ He acknowledged that “providing decent health-care coverage requires taking money away from some people in order to give it to other people.” In his artless way, Armstrong made the fundamentally redistributive function of health insurance more explicit than is generally “deemed socially acceptable.”

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Armstrong’s statement was “unnecessary, cruel, and dumb,” said Ezra Klein in He should be railing not against Obamacare, but against “the employer-based health-care system.” Armstrong’s AOL is “an older company with a large, aging workforce,” and it currently spreads its health-care risks over a limited pool of people—his staff. Under Obamacare, companies will in 2017 be able to get insurance through the state exchanges. That will enable AOL and other companies to “add their employees to a much larger risk pool —in some cases, millions strong.’’ One or two sick employees would no longer hurt a company’s bottom line. Soon, thanks to Obamacare, each workplace will no longer be “a tiny welfare state unto itself.”

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