Two unsubstantiated claims from AOL CEO Tim Armstrong about his company's cuts to retirement plans elicited two very different reactions from one Fox News segment.
Last week, AOL's chief executive officer Tim Armstrong announced that the company was paring down retirement benefits because of the high costs of two employees' "distressed babies" and the increased costs of health care resulting from the Affordable Care Act (ACA or Obamacare). Armstrong later apologized for the statement about the two employees and the company restored the cuts to 401(k) plans.
Discussing the story on Fox's America's Newsroom, host Martha MacCallum performed a rhetorical dance that led an ostensibly critical segment of Armstrong's comments into a fact-free attack on the ACA and a defense of corporate scapegoating.
MacCallum prefaced the segment by noting that, insofar as Armstrong was blaming any babies for cuts to employees' retirement, she felt that the comments were “unfortunate.” But then she spring-boarded into her main focus: AOL wouldn't have to do these things if there wasn't a war on business spearheaded by Obamacare. According to MacCallum, AOL's decision to cut 401(k)s “does reflect a reality, an underlying reality, that a lot of companies are facing -- finding ways to make ends meet,” yet she never clarified whether AOL is one of the companies facing such an undefined “underlying reality.”
She offered an aggressive defense to Fox contributor Leslie Marshall's point that when companies struggle, their executives often do not. “It's always the big, bad company,” MacCallum said. “Big, bad corporate America ... is it right to not acknowledge that these companies are under pressures that they were not under before?”
The problem is, Armstrong didn't offer any evidence of how exactly the ACA caused AOL's woes, and MacCallum didn't bother to examine his claim before jumping to the corporation's defense.
LA Times' Michael Hiltzik accused the AOL executive of “blowing smoke” and “trying to shift blame to the Affordable Care Act for a cheeseparing benefit change he instituted” (emphasis added):
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. Here's a primer on how large pools work from Richard Mayhew, an insurance expert who blogs pseudonymously at Balloon-juice.com.
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.
In fact, Dylan H. Roby, director of Health Economics and Evaluation Research at the UCLA Center for Health Policy, wrote that it was “very unlikely” that AOL would have to change it's 401(k) to save money because of costs related to Obamacare:
[W]hy did Armstrong blame ObamaCare? The Affordable Care Act does include fees for insurers and third-party administrators to help fund efforts to stabilize the individual and small group insurance markets. In 2014, AOL may need to pay just up to $63 per year per insured employee. But because AOL offers comprehensive coverage to its employees, it would not be subject to the penalties that apply to larger employers that do not provide affordable coverage to their full-time employees, starting in 2015.
Employers cannot blame the president for unpredictable health care costs either. In the past four years, the rate of national health care spending growth slowed substantially to less than 4% per year -- half the growth rate of the previous four decades.
Although it's convenient for employers to blame Obamacare for any instability or changes to health-care spending, the fact remains that the cost of maternity or other benefits spread over a large insured population is minimal.
What Fox News is attempting here is not new. The network is quick to host anti-ACA business leaders whenever they make claims about the law's impact on their company, but rarely do Fox interviewers ask for any specifics to back up the claims. And the specifics are this: according to an Urban Institute study published last year, the Affordable Care Act will have a “negligible impact” on most business' costs.