4 better ways AOL could save on healthcare costs

AOL Chief Executive Tim Armstrong is a prototypical 21st century American captain of industry: His company doesn't manufacture any real-world product, and it has lost about 45 percent of its revenue since he took the reins in 2009. But since Armstrong spends most of his time squeezing out the costs of what's remaining, AOL's stock has doubled during his tenure. 

For making shareholders happy, Armstrong was compensated to the tune of $12.1 million in 2012, according to the Wall Street Journal.

But Armstrong, like many a 21st century titan, appears to have a contentious view of his employees. He fired one during a conference call last year because he suspected the employee was recording the proceedings, according to Business Insider. And Capital reports in another call with analysts last week, he cited the Affordable Care Act--along with two "distressed" babies born to AOL employees he claimed cost the self-insured company at least $1 million apiece--as among the reasons he was reshaping their 401k plans to their disadvantage.

Of course, the ACA is the whipping boy for a variety of maladies, and its critics recently pointed to a Congressional Budget Office report, claiming  it will cost 2 million jobs in the coming years.That the CBO report actually meant about 2 million Americans will voluntarily leave the workforce because they no longer need their jobs to get healthcare coverage is besides the point.

Of course, with bosses like Armstrong, I'm a little surprised the CBO projections are that low. The notion that someone takes home eight figures a year to helm an incredibly shrinking business while publicly dissing their employees--and perhaps even violating their HIPAA rights--should be enough in an ideal world to push a lot of people to quit in disgust.

It prompted at least one of those new parents, Deanna Fei, to pen a piece in Slate to explain "how we supposedly became a drain on AOL's coffers" (Fei's husband is an AOL employee).

"I take issue with how he reduced my daughter to a 'distressed baby' who cost the company too much money. How he blamed the saving of her life for his decision to scale back employee benefits. How he exposed the most searing experience of our lives, one that my husband and I still struggle to discuss with anyone but each other, for no other purpose than an absurd justification for corporate cost-cutting," Fei wrote.

Not surprisingly, Armstrong backtracked on the cuts not long after he announced them, according to Time. 

So, instead of alienating employees, here are four ways Armstrong might save his company money on healthcare costs while leading the company:

1. Negotiate with the hospitals who provided the care to bring the bill down even further. That's what a good self-funded health plan does on occasion. Offer to provide some of your company's resources to help them with their EHR transition. Or offer to make a donation to their charitable foundation. Or maybe even throw in a free AOL subscription, which I'm sure staff could use to browse the Internet on their downtime (unless it's dial-up, of course).

2. Reinforce your employee wellness initiative with an event featuring the two employee parents of the "distressed" babies. They can talk about how AOL's benefits kept their families whole, and that the best way to keep up company morale and productivity while defraying the costs is to keep in good physical condition. This may actually encourage more employee take-ups. And it is certainly better than blaming your workers' infants for slashing everybody else's benefits.

3. Take the $2 million out of your salary. When you're getting $12 million a year and are already worth hundreds of millions of dollars more, forking out $2 million is a bruise to your ego, not your pocketbook. Such a gesture might even lead people to think you're a mensch.

4. Figure out some initiative AOL could undertake that would improve the health of its subscribers. Figure out if it's beefing up telemedicine or rural health initiatives, and put some money behind it. It likely will pay off for your company--and employees--in the long-term. - Ron (@FierceHealth)

Suggested Articles

Industry competition over who controls healthcare’s “front door” is pushing legacy organizations to adopt new ways of thinking about M&A.

Medicare Advantage beneficiaries spend nearly 40% less than regular Medicare beneficiaries on care, a UnitedHealth Group analysis found.

Midsize regional health plans in particular face aggressive competition from large national players.