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AOL CEO Tim Armstrong is reversing himself. In a letter to employees this weekend, he apologized for blaming a change in the company’s retirement plan on the high costs of two employees’ “distressed babies.” He also said he was changing the retirement plan back to the way it was.
The mother of one of the “distressed babies” is speaking out. Deanna Fei, whose husband works for AOL, wrote in Slate, “Armstrong exposed the most searing experience of our lives for an absurd justification for corporate cost-cutting.”
Here & Now’s Robin Young speaks to Fei, as well as to journalist Olga Khazan of The Atlantic, who writes, “it’s hard to imagine how company structured like AOL could ever pay $2 million for two pregnancies gone wrong.”
Deanna Fei on AOL CEO Tim Armstrong’s comments
“I don’t doubt that her care was extremely expensive. What I do take issue with is this singling out of any individual for using their health plan in the situation like the one we faced, which was a catastrophe… It was not a high-risk pregnancy. There was not a single risk factor I had, there was not a single warning. And you know, I think that was his attempt to explain that he was actually talking about the fact that he does care about his employees’ welfare, but for me hearing that added insult to injury because it wasn’t true, but also because there’s the suggestion as if we kind of took on something risky and the company was generous enough and charitable enough to cover us when it went wrong.”
“It would be unthinkable to call out an employee who got breast cancer, you know, parents of a kid with chronic asthma. We just would never single these people out as someone doing anything except exercising their rights as employees. And I also want to point out, it’s a valid and probably necessary conversation on a national policy level to talk about healthcare expenditures. I don’t know the answers, but I know in this context, we’re talking about a publicly-traded company that had just posted its best quarterly earnings in years, that could afford to pay its CEO $12 million last year, a company where all of the employees have health insurance and there’s no reason to make it a zero sum game.”
Olga Khazan on Armstrong’s $1 million cost estimate for each “distressed baby”
“That’s a little bit puzzling because most premature babies cost about $50,000 more than most newborns do, and employers pick up about half of that cost… So even with two of those it would be far less than $1 million. We don’t know how much the other newborn, what kind of situation they were in, but it still seems like a bit of a stretch.”
ROBIN YOUNG, HOST:
It's HERE AND NOW. AOL CEO Tim Armstrong is backtracking. This weekend, he sent a letter to employees apologizing after he blamed a change in the company's retirement plan on the high cost of two employees' distressed babies. He also said he was changing the 401(k) retirement plan back to the way it was; meaning no employees will lose company matching funds, as they would under the proposed plan.
Now in a few minutes, we're going to explain the proposed change because other companies are taking it up, but first to Armstrong's claim that the birth of two babies made the cuts in the pension plan necessary because they cost a million dollars apiece. One of their mothers is speaking out.
Deanna Fei writes in Slate: (Reading) Tim Armstrong exposed the most searing experience of our lives for an absurd justification for corporate cost-cutting.
Deanna Fei joins us from the NPR studios in New York. Welcome.
DEANNA FEI: Thank you.
YOUNG: And when AOL heard that we were going to speaking with you, a spokesperson called us and said that Tim Armstrong had directly apologized to you. As much as you want to share, what did he say, and what did you tell him?
FEI: I'm not going to get into the exact, you know, words that he said because he spoke to me very sincerely, as a fellow parent. He's a father of three kids. He expressed his regret over what he said. You know, I forgive him. I mean, I can understand how, you know, we all say things, sometimes, that we wish we could take back.
YOUNG: Well, as some people know, Tim Armstrong does on more than - he has on other occasions as well. But tell us now, you gave birth to a baby in 2012 who weighed under 2 pounds. She was described by the shaken doctor as gelatinous, bloody, bruised all over.
FEI: That's right.
YOUNG: I mean, she had to stay for quite some time. You, as parents, did not know how much to attach to her, whether to name her. You didn't know what the outcome was going to be. I mean, pretty excruciating, yeah.
FEI: That's right. I mean, you know, on her first day, we were told that she had a pretty good chance of dying before we could ever bring her home. When we saw her, you know, she couldn't breathe, she couldn't nurse, she couldn't cry because of the ventilator. And, you know, it was the most traumatic experience that my family has ever been through - and that I hope we ever have.
YOUNG: Well, and the ending is a happy one. She sounds incredible, a year later.
FEI: Yes, and you know, that was also something that from the beginning the doctors pointed out; you know, she's a fighter. And given what she's going through, she's doing amazing. So even though the months in the NICU were really long - we had many days of getting updates from the hospital; things about her lung collapsing, a bleed in her brain - we had to just keep faith because you could see that she was fighting so hard for every minute of her life.
YOUNG: So her life was saved and as you write, the implication now from Tim Armstrong is that you and your family obscenely gobbled up too much of the health care pie. That was your take from what he said. You know, he was putting numbers like a million dollars on each of these "distressed," quote-unquote, babies. Do you have a sense of how much it cost?
FEI: I have seen bills that range from, you know, 11 dollars and a few cents to the high six figures. So I don't doubt that her care was extremely expensive. You know, what I do take issue with is this singling out of any individual for using their health plan in a situation like the one we faced, which was a catastrophe.
YOUNG: He also called it a high-risk pregnancy. In a letter to employees this weekend, he said this is the kind of - high-risk pregnancies are the kinds of things we help families with. But it wasn't a high-risk pregnancy. It was just a...
FEI: It was not a high-risk pregnancy. There was not a single risk factor I had; there was not a single warning. And you know, I think that was his attempt to explain that he was actually talking about the fact that he does care about his employees' welfare.
But for me, hearing that added insult to injury because it wasn't true but also because there's the suggestion as if, you know, we kind of took on something risky, and the company was generous enough and charitable enough to cover us when it went wrong. I mean, I am grateful for the benefits that we received, but, you know, unless you're going to say that...
YOUNG: This was just a regular pregnancy.
FEI: Exactly. I mean, you know, the whole business of bringing babies into the world can be fraught with peril.
YOUNG: To play devil's advocate - someone might say, well, I have been wondering why do I have to pay for a pregnancy at all? I don't have children. And you have a response to that. Again, you've already said this is what insurance is for, but a lot of families have something that needs to be paid for.
FEI: Right. I mean, it would be unthinkable to call out, you know, an employee who got breast cancer; you know, parents of a kid with chronic asthma. We just would never single these people out as somehow doing anything other than exercising their rights as employees.
And you know, I also want to point out - I mean, it's a valid and probably necessary conversation on a national policy level, to talk about health care expenditures. I don't know the answers. But I know that in this context, we're talking about a publicly traded company that had just posted its best quarterly earnings in years that, you know, could afford to pay its CEO $12 million last year; a company where all the employees have health insurance. And there's no reason to make it a zero-sum game.
YOUNG: That's Deanna Fei, mother of one of the babies that AOL CEO Tim Armstrong said was the reason that the company had to cut pension plans. Deanna, thanks for speaking with us.
FEI: Thank you so much.
YOUNG: And by the way, Deanna told us that her baby is taking her first steps, seems fine, and it's all because of this medical intervention. Olga Khazan covers health for The Atlantic, and has dug into some of the issues here. Olga, we just want to touch base with you, and start with the cost. You, of course, don't know exactly what Deanna's costs were, but your thoughts on the million-dollar number that AOL's CEO cites.
OLGA KHAZAN: Right, that's a little bit puzzling because most premature babies actually cost about $50,000 more than other newborns do, and employers pick up about half of that cost. So getting - even with two of those, it would be far less than 1 million. And, you know, we don't know how much, you know, the other newborn, what kind of, you know, situation they were in. But it still seems like a little bit of a stretch.
YOUNG: In fact, you say that both distressed babies, as it was put, together might have cost the company about $100,000, not a million apiece?
KHAZAN: That's correct. I mean, there are some added kind of costs to employers in case, you know, the parents were out for an extended period of time or if they, you know, had to take extra leave. But that would all be kind of negligible; somewhere in the, you know, thousands - $2,000, thereabouts.
YOUNG: And of course, a lot of this is out of money that employees pay in their premiums when they pay for their insurance. But let's get to the retirement plan change that AOL sought. Now, they have a matching 401(k) plan. AOL would match employees' contributions in every paycheck, as most companies do who have the matching plan, and they match it up to a certain amount.
They wanted to change that to give a lump sum at the end of the year. In other words, the employees would make their contributions during the year; AOL would match it at the end of the year. But they would not give any if employees left before December; employees who leave would get nothing. This is an effort to reduce employee turnover. Is this common?
KHAZAN: Well, I think it's becoming more common, especially among big tech companies if they're having any kind of financial turbulence. You know, it can be a good deal for the company because any employee who leaves before the end of the year doesn't take their, you know, matching retirement funds with them. So it's something that they - you know, IBM and others have shifted to.
YOUNG: So this is a story - of course, it directly affects this one mom and another mom. But employees beware that your company as well may be thinking of changing your 401(k) plan. We'll link you to Olga Khazan's article in "The Atlantic" and Deanna Fei's story as well, at hereandnow.org. Olga, thanks so much for checking in with us.
KHAZAN: Thanks so much for having me.
YOUNG: You're listening to HERE AND NOW.
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