AOL CEO Tim Armstrong recently ignited a firestorm of criticism when he announced the company would be restructuring its retirement benefits. Armstrong explained that the financial burden of Obamacare and the deliveries of two “distressed babies”, which cost the company $1 million each, had forced the company to reduce 401(k) matching contributions:
We had to decide, do we pass the $7.1 million of Obamacare costs to our employees? Or do we try to eat as much of that as possible and cut other benefits? …Two things that happened in 2012. 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. And those are the things that add up into our benefits cost.
Sorry, AOL employees: you can either get your expensive babies or your retirement benefits, but you can’t get both.
Armstrong has since issued a public apology and, amidst uproar from his employees, reversed the benefits decision. But his remarks remain significant, illustrating the readiness of employers to use maternity costs and the new health law as scapegoats for other business decisions that affect company profits. His comments also reflect the extent to which pregnancy, childbirth, and childcare are considered lower priorities in the workplace than other health benefits.
In an era of ever-rising health costs, it is certainly reasonable for AOL to seek ways to reduce health spending. But why single out premature births instead of, say, cancer or diabetes cases? Apparently in American corporate culture maternity coverage is still considered a “bonus” benefit that employees should feel lucky to have. You’d think this wouldn’t be the case at AOL, whose decade-old Well Baby program provides education and support for employees throughout the pre-natal and post-partum stages. Armstrong’s comments run counter to AOL’s public persona of being a company truly invested in the health and wellness of its parents and their families.
Maternity coverage should be considered a routine component of employee benefits, especially since they have been mandated in employer health plans for more than three decades. In 1978, Congress passed the Pregnancy Discrimination Act (PDA) – an amendment to the 1964 Civil Rights Act – in an effort to end pregnancy-based discrimination in the workplace. Benefits required by the PDA are both ethically sound and financially prudent. Research has shown that every dollar spent on prenatal care saves employers $3.33 in postnatal care expenses and $4.63 in long-term morbidity costs.
Based on Armstrong’s comments one might assume $1 million births a commonplace occurrence, but they aren’t. It’s true that one in every eight infants in the United States is born pre-term, but the average cost of care for the majority of those babies doesn’t come close to seven figures. Approximately 70 percent of infants admitted to the NICU stay for longer than 20 days, which typically costs between $40,000 and $80,000. The high costs associated with the two pre-term births to which Anderson refers are not the norm.
Why should the economic security of employees be first on the chopping block? Armstrong might have been a bit more introspective before publicly pointing his finger at his employees’ pre-term babies. After all, shortly before his gaffe went viral, he was in the harsh glare of the media spotlight for the overwhelming failure of Patch, a media venture he championed that lost AOL $300 million (last month the company cut its losses and sold its majority stakes in the site). Two million dollars in NICU expenses seems quite reasonable by comparison.
AOL, like many large companies, is self-insured. As such, it directly pays employee health costs and assumes that the risk of catastrophic health events is worth the expanded choices in health benefits and the increased savings that results when income from premiums exceeds health costs. It’s unfair for companies to sacrifice the economic security of their employees when those bets don’t pay off.
It is simply dishonest to lay the blame for such losses of maternity care and Obamacare expenses. After all, the new law will improve the health of employees and generally lower employer costs in the long run by mandating the full coverage of family planning, women’s preventive health care, and extended coverage for children of employees. These measures will reduce unplanned and mistimed pregnancies (which still account for nearly half of all U.S. pregnancies) and enable women and their families to prevent and treat health conditions long before they become emergencies.
We must not regard maternity coverage as a bonus benefit. It is indeed a benefit central to employee health coverage and essential to the economic security and overall wellbeing of American workers and their families. The inherent value in such coverage was enshrined in laws passed more than 30 years ago, and has been reaffirmed by Obamacare. It’s long past time for executives like Armstrong to live and speak those same values when making decisions that affect the health and security of their employees.