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That “distressed baby" Tim Armstrong blamed for benefit cuts? She’s my daughter

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Re: That “distressed baby" Tim Armstrong blamed for benefit cuts? She’s my daughter

#151

Post by lutusp »

ItendToDisagree wrote: post #84
lutusp wrote: post #57

Earlier quoted context omitted.

> the point of insurance in general (not just healthcare), to protect against outliers? No, the point of insurance is to enrich the stockholders of the insurance company. This might sound like a leftist rant, but it's actually the singe most important thing to understand about the insurance business. If a policy term doesn't contribute to the bottom line, it's changed to disfavor the policy holder. If a deductible am…

Agreed, the point of 'any' company is to enrich the stockholders. I was more saying the point of insurance in general to those buying the insurance is to protect against outliers. Not debating the point that insurance companies are there to make a profit rather than to service people. Agree with what you're saying but it doesn't address what I was asking. Edit: Also since AOL 'self insured' there wasn't an insurance…

> I was more saying the point of insurance in general to those buying the insurance is to protect against outliers.

Yes, and the basic principle of an insurance pool is to use the pool's size to absorb the impact of an outlier event. The larger the pool, the better it is able to absorb such an event. This means a small company can be a risky place to set up a self-insurance scheme on which the employees depend.

> since AOL 'self insured' there wasn't an insurance company at the heart. AOL just decided to cut corners and 'put away money for a rainy day', and was shortsighted on how much to put away, to put it simply

Yes, and that's a surprisingly common outcome -- it's the downside of self-insurance plans -- often a company or an individual doesn't actually have the resources to deal with an outlier, or a sudden surge in claims is synchronized with a business reversal.

Re: That “distressed baby" Tim Armstrong blamed for benefit cuts? She’s my daughter

#152

Post by lutusp »

a3n wrote: post #82
lutusp wrote: post #57

Earlier quoted context omitted.

> the point of insurance in general (not just healthcare), to protect against outliers? No, the point of insurance is to enrich the stockholders of the insurance company. This might sound like a leftist rant, but it's actually the singe most important thing to understand about the insurance business. If a policy term doesn't contribute to the bottom line, it's changed to disfavor the policy holder. If a deductible am…

But it's sold to payers of premiums as protection against outliers. And if it's sold as such, but isn't really, then it's fraud. Let a hundred lawsuits bloom.

That's all true, but even gigantic insurance companies are sometimes overwhelmed by a surge in claims. Is that fraud too?

People need to understand that insurance is a kind of gambling -- a bet that claims won't wipe out the fund pool, that a random act of nature won't undermine the actuarial assumptions on which the pool is designed.

Re: That “distressed baby" Tim Armstrong blamed for benefit cuts? She’s my daughter

#153

Post by dkural »

pg wrote: post #92
ekidd wrote: post #31

I'm delighted to hear that this child is doing well, and I'm utterly appalled at Tim Armstrong's attitudes towards the lives of his employee's children. Apparently it's possible to pay a programmer $100K/year, but spending ten times that to save the life of one of his employee's children is absolutely unacceptable. I'll be sure to keep that in mind the next time I hear from an AOL recruiter. The whole point of insura…

"I'm utterly appalled at Tim Armstrong's attitudes towards the lives of his employee's children. Apparently it's possible to pay a programmer $100K/year, but spending ten times that to save the life of one of his employee's children is absolutely unacceptable." Did he say that?

What is your interpretation Paul? What did he say? Do you think Tim did anything wrong or do you advice that Tim sticks to his guns on this one & shouldn't have caved in with that second memo?

Re: That “distressed baby" Tim Armstrong blamed for benefit cuts? She’s my daughter

#154

Post by jbapple »

lutusp wrote: post #140
jbapple wrote: post #121

Earlier quoted context omitted.

How often do self-insuranced companies run out of their set-aside? When that occurs, do their employees simply go without health care?

> How often do self-insuranced companies run out of their set-aside? I don't have any figures at my fingertips, but I know it's more often than insurance corporations, which are highly controlled by governmental oversight to prevent that very thing. > When that occurs, do their employees simply go without health care? Yes, that's exactly what happens. Sometimes instead, a company will stop offering in-house insurance…

It sounds like working for a self-insured company is strictly worse for employees than working for a company that offers insurance through an insurance company, risk-wise.

Re: That “distressed baby" Tim Armstrong blamed for benefit cuts? She’s my daughter

#155

Post by a3n »

lutusp wrote: post #142
a3n wrote: post #85

Earlier quoted context omitted.

Insurance companies re-insure. Can't a self-insured company do the same? https://en.wikipedia.org/wiki/Reinsurance

The problem with a self-insurance plan re-insuring is that it undermines the very reason for the self-insurance -- it erodes the advantage of local investment of the set-asides.

But not totally, and would presumably protect against catastrophic catastrophes by spreading the meta-risk.

You could make the same argument against having home or medical insurance, that it erodes the advantage of having the totality of your take home pay. But it seems responsible to have home insurance and medical insurance, and it would seem responsible for a self-insurer to reinsure.

Re: That “distressed baby" Tim Armstrong blamed for benefit cuts? She’s my daughter

#156

Post by lutusp »

jbapple wrote: post #154
lutusp wrote: post #140

Earlier quoted context omitted.

> How often do self-insuranced companies run out of their set-aside? I don't have any figures at my fingertips, but I know it's more often than insurance corporations, which are highly controlled by governmental oversight to prevent that very thing. > When that occurs, do their employees simply go without health care? Yes, that's exactly what happens. Sometimes instead, a company will stop offering in-house insurance…

It sounds like working for a self-insured company is strictly worse for employees than working for a company that offers insurance through an insurance company, risk-wise.

Not "strictly worse", because if one cares about maximizing profits for the company and wages for the employees, the self-insurance route might be better overall. Formal insurance arrangements can be a real drain on resources. On the other hand, some companies choose to self-insure without fully appreciating the risks.

Re: That “distressed baby" Tim Armstrong blamed for benefit cuts? She’s my daughter

#157

Post by pg »

scotty79 wrote: post #129
pg wrote: post #92

Earlier quoted context omitted.

"I'm utterly appalled at Tim Armstrong's attitudes towards the lives of his employee's children. Apparently it's possible to pay a programmer $100K/year, but spending ten times that to save the life of one of his employee's children is absolutely unacceptable." Did he say that?

Sometimes it's not about what you say but about what people infer about what you think from what they've heard.

Depends what you mean by "about." Do you mean

1. People often attack you for some belief they mistakenly attribute to you.

or

2. What you actually say or believe doesn't matter. If people want to make up some belief to attribute to you in order to attack it, that's fine.

If you mean 1, I agree. But I would hope that here, at least, we wouldn't sink to that sort of mob behavior.

Re: That “distressed baby" Tim Armstrong blamed for benefit cuts? She’s my daughter

#158

Post by mratzloff »

I don't think you guys understand how this works. Armstrong earned his $12 million salary. Employees, meanwhile, receive health care as an unearned benefit bestowed on the commoners by the wealthy. If they abuse this gift (by having premature babies, cancer, etc.), they will be expected to make up for these extra costs elsewhere.

Blame the law for this: clearly those employees who abuse the system should be fired outright, preferably on a conference call with 1000 people in attendance. Sadly, due to government overreach, it is considered illegal.

Re: That “distressed baby" Tim Armstrong blamed for benefit cuts? She’s my daughter

#159

Post by mbreese »

ericd wrote: post #143
mbreese wrote: post #134

Earlier quoted context omitted.

No, he was cutting benefits in general and used healthcare expenses as a rationale for it. This may be a good thing for the company's bottom line, but the optics are horrible. Even if the policy was sound (and I'm not sure it is), the delivery ruined it. It will be hard to say how he can be an effective leader at this point.

I don't see how you were disagreeing with me? He was making the 401k plan marginally worse, not cutting benefits in general. I wasn't saying anything about his ability to lead going forward, just that if their medical policy is going to continue to be willing to pay for these unusual events in the future that he probably doesn't view them as unacceptable.

He is cutting benefits overall, not completely, but it is still a cut. AOL decided to keep medical benefits high at the expense of retirement benefits. This is probably the right call, but the way that it was presented just made the entire thing look awful.

Regardless of what benefits were cut, citing specific instances of medical care as a cause for the cuts is such a horrendous mistake that it will be difficult for him to effectively lead. That was my addition. When your employees turn against you, and you have made such a blunder publicly so as to make potential employees not want to join AOL, it will be hard to lead. And the worst part is, it's not necessarily the cut itself that is the issue, but how it was presented and rationalized. Had he just said that healthcare costs are increasing, so to avoid cutting health benefits we are reducing (marginally) your retirement benefits, he might have been okay.

I mean, look at the way this sounds: Why is my 401k contribution lower this year? Because your coworkers had babies.

That may not be what he said, but that's where the story went.

Re: That “distressed baby" Tim Armstrong blamed for benefit cuts? She’s my daughter

#160

Post by justin66 »

fiatmoney wrote: post #98

If your company cannot afford to pay $1M insurance claims, you shouldn't be in the business of insuring medical coverage. You should be re-insuring that risk. There are many companies that will be happy to do this for you. The fact that apparently AOL is on the hook for medical claims by its employees indicates they've made a reasoned judgement that their risk pool is diverse enough that it's worthwhile to self-insur…

Exactly. The expectation from the outset would have been that they'd pay out less over time but experience more volatility, given the small risk pool. Complaining about the volatility is just nonsensical.

I expect Anderson understood this but had to look for a reason to cut 401K matching in a profitable quarter, and increasing executive compensation didn't sound quite right, so... the high cost of saving babies! Whadda guy.

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