Go Lean…Caribbean

Go Lean Commentary

In the forgoing article, Tim Armstrong, the comments of the CEO of America Online (AOL) resulted in outcry around the country! There were allegations of scapegoats, privacy violations and various sins in making this announcement. What gives this CEO the right to highlight these families’ struggles? Well, can you say two million dollars? This man is not a Director of a Hospital refusing care. No, he is the CEO of the company paying the bills. Two million dollars taken out of the budget and the CEO cannot comment on it? Why are his actions being chastised?

By: Michael F. Cannon, Contributor

Unless you’ve been living under a rock, you’ve heard about AOL CEO Tim Armstrong’s strikingly insensitive comments about why the company is cutting its retirement benefits:

“As a C.E.O. and as a management team, we had to decide, do we pass the $7.1 million of Obamacare costs to our employees? Or do we try to eat as much of that as possible and cut other benefits?…”

“Two things that happened in 2012”, he continued, “we had two AOL-ers that had distressed babies that were born that we paid a million dollars each to make sure those babies were OK in general. And those are the things that add up into our benefits cost. So when we had the final decision about what benefits to cut because of the increased healthcare costs, we made the decision, and I made the decision, to basically change the 401(k) plan”.

Perhaps Armstrong felt commendations were in order. After all, the company’s health plan did pay a ton of money to keep those kids alive. Not as much as his annual salary, but still. And though you could be forgiven for missing it, he was actually announcing he had decided not to drop AOL’s “distressed babies” benefit.

But it’s hard to muster an “Attaboy!” when Armstrong is effectively blaming extremely premature infants, who are clinging desperately to life, for the cuts he chose to make in his employees’ retirement benefits. We’re still paying to keep these precious little angels alive, he assured his employees. But if any of you are mad about your pay cut, you know who to blame.

One of those babies has a mommy who wasn’t about to take that lying down.

In October 2012, only five months pregnant, Deanna Fei went into labor. Her daughter arrived via caesarian section weighing only 1 pound, 9 ounces, and spent the next three months in a neo-natal intensive care unit. Fei, a novelist, wrote at Slate about the anguish she and her family endured.

She also had choice words for her husband’s boss.

“Let’s set aside the fact that Armstrong—who took home $12 million in pay in 2012—felt the need to announce a cut in employee benefits on the very day that he touted the best quarterly earnings in years,” she wrote. It was “a cruel violation” to make her child “a scapegoat for cutting benefits.”

There was “the whiff of judgment in Armstrong’s statement, as if we selfishly gobbled up an obscenely large slice of the collective health care pie” when in fact “we experienced exactly the kind of unforeseeable, unpreventable medical crisis that any health plan is supposed to cover. Isn’t that the whole point of health insurance?”

“While he’s at it, why not call out the women who got cancer? The parents of kids with asthma?”

I’m totally with Fei. I still remember the panic I felt when our first child (41 weeks) took about one minute to start breathing on his own and our second (37.5 weeks) was born a little too pale. I cannot imagine visiting my child every day in a NICU for three months, much less the added trauma that mommies suffer in those cases. And I would be just as outraged by the indignity of having my spouse’s employer use our experience as a scapegoat, or claim that we are indirectly responsible for someone else’s pay cut.

Fei and her family owe no one an apology. Full stop. They paid their premiums. They used their coverage for its intended purpose. Their situation is exactly why health insurance exists.

It is also possible to sympathize with Armstrong. He has a duty to AOL shareholders to keep the company profitable. Part of that responsibility is to decide how much to pay AOL employees – and how to divide that sum among salary, health benefits, retirement benefits, and other forms of compensation. Someone’s going to be angry at him no matter what he decides. And in this case, he decided not to let those cuts fall on health benefits. Assuming he’s doing right by AOL’s shareholders, who probably include many AOL employees, he owes no one an apology for his $12 million salary. To be sure, he owes Fei and her family an apology – which he has issued and she has accepted.

How did we get to this point, where Fei’s husband’s boss knows how much it cost to save their baby’s life and can telegraph that figure to his coworkers and the world? Where an offhand comment by your employer can add to your grief by exposing your family’s medical history to your coworkers, and possibly make you a target of resentment?

The answer is that even before ObamaCare, America has had a health care sector dominated by government involvement. Yes, this capitalist’s insensitive comments are an example of government failure.

Ninety percent of Americans with private health insurance get that coverage through an employer. This state of affairs wasn’t brought to you by the free market. In a market where we all get to make our own choices, what responsible parent in their right mind would voluntarily choose for their family a type of health insurance that disappears when you get sick and cannot work anymore? Or when the factory closes? A type of health insurance where, if you have a high-cost condition, you are more likely to end up uninsured than if you bought coverage directly from an insurance carrier?

The reason more than 100 million Americans make the otherwise irrational decision to enroll in an employer-sponsored plan is that around 70 years ago, the federal government created an enormous tax preference for those plans that is not available if you buy more secure coverage directly from an insurer on the “individual” market. The upshot of that tax preference is that if consumers purchase health insurance themselves, they can spend up to twice as much for the same coverage. Economists have chronicled how the tax exclusion for employer-sponsored health insurance increases health care spending and thus the cost of health insurance, as well as how it reduces consumers’ health insurance choices. Yet the federal government makes it economically rational for 90 percent of consumers to purchase an inferior product that creates so many harmful effects.

Another harmful effect of this government policy is that the Tim Armstrongs of the world have far too much (read: any) influence over your family’s health insurance and medical decisions. (What if Armstrong had chosen to pare back AOL’s distressed-baby benefit?) They also end up knowing far too much (read: anything) about your family’s most emotionally difficult moments.

I won’t pretend private health insurance companies aren’t also obligated to serve shareholders or always have their customers’ best interests at heart. But how often do you hear the CEOs of insurance companies publicly say the sort of boneheaded thing Armstrong did? Not very. Even though they have to make comparable tradeoffs between covered benefits, affordable premiums, and profits, they don’t do what Armstrong did. They’re in the business, so they know better. When insurance companies say boneheaded things about their high-cost customers, they tend to do so quietly. You know, in internal memoranda. If I’m overlooking instances of insurance company executives doing what Armstrong did, please let me know in the comments.

Even if the CEO of, say, Aetna mentions they had a couple of million dollar babies last year, it wouldn’t expose those families the way it does when CEOs say it about their company-sponsored health plans. If everyone were making their own coverage choices, your coworkers would have no idea where you buy your health insurance unless you wanted them to know. And that’s as it should be. You would also have the option of leaving Aetna for another carrier that wasn’t so boneheaded, or if only because you don’t like the tradeoffs they are making between benefits, premiums, and profitability. Switching health plans is much harder when it might require switching jobs.

The federal government has let this boneheaded tax preference for employer-sponsored health insurance sit undisturbed for seven decades, even as it led to privacy violations and fueled the problem of pre-existing conditions. That should make us even more wary of the government’s latest brilliant health care idea.

How long will it take Congress to fix the more boneheaded elements of ObamaCare? Seventy years? More?

Source: http://www.forbes.com/sites/michaelcannon/2014/02/10/aol-chief-tim-armstrongs-insensitivity-argues-against-obamacare-not-for-it/

As the chief executive of the company, it was his job to pursue what he thought was in the best interest of the company. Would it have been preferred that instead, he simply laid-off some employees?

Many people were upset over his choice of the word “distressed babies”. Was he wrong? These babies were born early (pre-mature), with a $2 million price tag. And those bills were paid.

Had this been Joe-the-Plumber complaining that he lost his job because two distressed babies cost the company two million dollars, he would have gotten national sympathy and the news would have been about the failure of health care or Obama Care more exactly. Instead, this discussion is about the CEO of America Online. This is a BIG company, BIG business, BIG money – and so, this is a BIG deal.

From the perspective of the roadmap for this implementation of the Caribbean Union Trade Federation, this issue of Tim Armstrong-AOL-Health-Plan is also a BIG opportunity.

Something is wrong in this whole scenario!

It is “off-whack & off-kilter” that it costs families and communities so much for healthcare. There is no way we can afford this kind of price dynamics in the Caribbean. Nor do we want to leave our pregnant mothers and premature babies completely abandoned. No one wants to have a society like that. If so, there will be no opportunity to invite the Diaspora back home, nor dissuade families from abandoning their Caribbean homeland for foreign shores – the “push-and-pull” factors would be too great.

So where emotions may trump economics, economics are not eliminated just because we have emotional leanings. The article portrays the economic truths: “the tradeoffs … between benefits, premiums, and profitability.”

The Go Lean…Caribbean roadmap posits that the member-states need a larger pool for health insurance benefits, premiums, and profitability. The market size of 42 million is a viable solution. Plus new financial products like re-insurance sidecars in an energized securities/capital market, thanks to the Caribbean Dollar and a technocratic Caribbean Central Bank.

The roadmap also calls for strategic and tactical solutions for big money treatments, like cancer, by facilitating medical research campuses and medical tourism under the guise of Self-Governing Entities.

Lastly, the Go Lean roadmap promotes the practice of predictive wellness programs and disease management schemes, tackling head-on the root causes of so many medical distress and costs enablers.

Download the book, Go Lean … Caribbean and add your commentary.