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View Diary: AOL CEO Reverses Benefit Cuts (46 comments)

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  •  Does AOL self-fund their health insurance? (20+ / 0-)

    I was gonna post about this tonight, but didn't think it would gain much traction on a Saturday night.  I guess I forget about all the west coasters that are three hours behind me! ;)

    TechCrunch (an AOL tech-themed website) had a post today on this issue.

    Most of the article was about the decision to reverse benefit cuts, but there is a great tidbit about how AOL does health care.

    The article author infers that AOL uses a self-fund health insurance plan:

    While, as Aol employees, we’re psyched and grateful to have our 3% per pay period matching back there are still a couple of questions left to be answered.

    1) What is a “distressed baby”?

    2) Why would Aol have to pay $2 million out-of-pocket for two individual’s specific medical conditions? It’s likely that, like many large companies, Aol is self-insured, but usually self-insured companies buy stop-loss insurance for outsize costs like a premature or otherwise “distressed” child.

    If AOL does indeed self-fund, then the CEO is 100% lying about Obamacare impacting their bottom line.  Self-funding means that the company itself bears all the risk of benefits payouts, rather than letting a health insurance company bear the risk.

    Companies may do this for a number of reasons, but the main one is to save lots of money that otherwise just go to Aetna/Cigna/United Healthcare/etc. as pure profits.  It's also ironic given that self-funding is essentially a single payer system, just at a far lower enrollment than state-wide or federal-wide...

    "Give me a lever long enough... and I shall move the world." - Archimedes

    by mconvente on Sat Feb 08, 2014 at 08:54:01 PM PST

    •  AOL = Another Obamacare Liar (13+ / 0-)
      As for AOL's  Obamacare-related costs, what is Armstrong talking about? He didn't specify, which is reason itself to believe he's blowing smoke. As a large employer, AOL doesn't face any new healthcare mandates under the Affordable Care Act, except to allow employees to keep children on their health plans up to age 26.

      But that's an incremental cost, extremely unlikely to come to $7.1 million--the old ceiling was age 19 or through college; and young people are relatively cheap to cover. There's a $63 per plan enrollee fee that kicks in this year, but even if every AOL employee enrolled three family members, that would come to about $1.3 million. The next possible bump in costs is a tax on high-value "Cadillac" health plans, but that doesn't begin until 2018.

      Armstrong doubled down on the obfuscation during a meeting with employees, at which he cited coverage expenses to "two AOL-ers that had distressed babies." Their medical expenses came to $1 million each, he said. Health insurance experts are scratching their heads at this.

      As a large employer, AOL may be self-insured, but it's also big enough to take advantage of all the tools available to large-group insureds, such as reinsurance, to moderate the impact of such isolated costs.[...]

      The most likely conclusion to draw from all this is that Armstrong is trying to shift blame to the Affordable Care Act for a cheeseparing benefit change he instituted--especially since the change was announced in conjunction with AOL's quarterly fianancial report. Quarterly revenue looked strong, but to the extent it flowed down to profits, the reason was stringent cost-cutting at AOL. Looks like that trend, at least, will continue.

      "I am not interested in picking up crumbs of compassion thrown from the table of someone who considers himself my master. I want the full menu of rights." (From "You Said a Mouthful" by Bishop Desmond Tutu - South African bishop & activist, b.1931)

      by FiredUpInCA on Sat Feb 08, 2014 at 10:56:02 PM PST

      [ Parent ]

    •  A big CEO "100% lying"? Surely you jest! n/t (0+ / 0-)

      "Bernie Madoff's mistake was stealing from the rich. If he'd stolen from the poor he'd have a cabinet position." -OPOL

      by blue in NC on Sun Feb 09, 2014 at 04:28:50 AM PST

      [ Parent ]

    •  two comments: (4+ / 0-)
      Recommended by:
      Kayak, akeitz, VClib, nextstep

      1. Yes, AOL does self-insure.

      2. ACA removed the lifetime benefit caps, hence the cost being born by AOL now. If they haven't used reinsurance in the past (the 10-k doesn't say anything and I haven't been able to find financials for the plan yet), they probably will now, but in any event that's marginal cost directly attributable to the ACA.

      •  I think re-insurance is important here (1+ / 0-)
        Recommended by:

        My friend had a terribly expensive illness. Her husband went to his HR department to ask if it was messing up the company. The HR person told him, "Don't worry about it. We're self-insured but our reinsurance kicked in. Hope your wife gets better."

        In this case, the employer happens to be a non-profit childrens' hospital, FWIW.

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