Video: AOL CEO says ObamaCare adding $7 million to costs

posted at 9:41 am on February 6, 2014 by Ed Morrissey

Remember when Democrats sold ObamaCare as a system that “bends the cost curve downward”? Tell that to employers, who face a make or break decision point this year when the employer mandate comes into full force for 2015. Do companies dump health insurance in order to control their costs, or pay the higher costs and pass them along to employees as reductions in compensation? Tim Armstrong explains to CNBC that employers — even one as large as AOL — can’t avoid what is a $7 million question to him (via Daniel Halper):

“We have to look at our benefits programs very seriously,” said Armstrong. “In the CEO chair, let me give you an example of the decisions we have to make as a company: Obamacare is an additional $7.1 million expense for us as a company. So we have to decide whether or not to pass that expense to employees or whether to cut other benefits.”

Speaking of bending cost curves, a lot of people have noticed that their new and supposedly oh-so-much-better insurance has a lot fewer choices when it comes to providers. In Covered California, some have found that they have nearly no choice, for example. The Obama administration and Democrats on Capitol Hill are threatening insurers to restore provider networks, but the insurers say they have no choice if they want to keep premiums low:

Insurers are facing pressure from regulators and lawmakers about plans that offer limited choices of doctors and hospitals, a tactic the industry said is vital to keep down coverage prices in the new health law’s marketplaces.

This week, federal regulators proposed a tougher review process for the doctors and hospitals in plans to be sold next year through HealthCare.gov, a shift that could force insurers to expand those networks. …

A spokesman for America’s Health Insurance Plans, the industry’s main trade group, said narrower provider networks are “one way health plans can help to preserve benefits and mitigate cost increases for consumers” as health-law changes take effect.

Narrower networks can help keep down costs partly because providers agree to lower their fee in exchange for the volume of business they expect with fewer competitors.

Some 70% of new plans under the health law offer relatively narrow networks compared with many current plans, according to a recent report by McKinsey & Co. The consulting firm found that plans with smaller choices of hospitals had significantly lower premiums than similar plans offering a broader choice.

The narrow networks have drawn protests, lobbying and some legal challenges from doctors and hospitals.

Insurer networks are providers who agree to a reimbursement schedule from the insurer. The tighter those reimbursements, the narrower the provider network will become as providers decline to join on those price schedules. In order to make a network broader, insurers would have to offer better reimbursements — which would force premiums to go up. This is nothing more than Risk Pool 101, or even more basically, the law of supply and demand.

It’s also a demonstration of the difference between price and cost. One can easily bend price curves downward, but not without serious distortions to product/service and delivery, and to the larger market overall. And even then, consumers will see very quickly through the illusion of price manipulation, especially since those manipulations are unsustainable.

So far, these disasters have been confined to the individual-plan markets. When they hit the employer-provided group markets, the disaster will amplify exponentially. Either employees are going to get hit with massive increases in insurance costs, or will get kicked out of their group plans altogether. AOL won’t just eat that $7 million, and neither will anyone else’s employers.

 


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Is AOL even worth $7M?

Jeddite on February 6, 2014 at 9:43 AM

Yes, but according to the Spite House, this is an AWESOME thing because it will eliminate “joblock”. Whatever that is.

What is it going to take to remove the “Regimelock” that is going on right now?

ConstantineXI on February 6, 2014 at 9:47 AM

This line right here:

“The Obama administration and Democrats on Capitol Hill are threatening insurers to restore provider networks”

Soon everyone in healthcare will work for the government.

bsinc1962 on February 6, 2014 at 9:48 AM

Remember — The unions don’t want ObamaCare killed for everyone. They just want an exemption for themselves so they can go to workers and say support unionization and you can have ObamaCare-free health insurance plans.

jon1979 on February 6, 2014 at 9:48 AM

Not sure what’s more shocking, that the ACA adds $7M or that AOL’s still around…

Rufus on February 6, 2014 at 9:49 AM

what is an aol?

devadevadasa on February 6, 2014 at 9:49 AM

AOL chatroom users have been all over this today.

Bishop on February 6, 2014 at 9:50 AM

Can only hope we begin to “fix” this mess in November during mid-terms. I work for a large employer, >300K employees, and can only imagine how this is going to effect us.

Southern And Proud Of It on February 6, 2014 at 9:50 AM

AOL? Really?

Kafir on February 6, 2014 at 9:51 AM

Don’t really have a lot of sympathy for a company that bought Huffington Post whose useful idiots have been pushing ObamaCare from day 1.

Maybe Arianna can help with the costs.

HumpBot Salvation on February 6, 2014 at 9:53 AM

AOL chatroom users have been all over this today.

Bishop on February 6, 2014 at 9:50 AM

The 1990′s called. They want their AOL floppys back.

ConstantineXI on February 6, 2014 at 9:54 AM

Whenever government manipulates the free market price rises…

PatriotRider on February 6, 2014 at 9:54 AM

What AOL CEO Tim Armstrong is missing here is that these changes are a good thing. This will free all his employees from the horrifying burden of “job-lock” – freeing them to be artists and pot smokers and stuff. No longer will the lowly customer service representative be forced to slave away for sometimes up to eight hours doing tedious and un-emotionally filling work to earn money to pay stupid bills – Obamacare now allows him to live off the hard work and redistributed taxes of his boss and use his EBT card for some of that sticky cronic that fuels his real passion… breakfast food sculptures – and isn’t that what the American Dream is really about? Doing what makes you feel good and letting the DNC borrow your identity come election day.

MNComics on February 6, 2014 at 9:55 AM

Looks like AOL might have to cut back on their budget for mailing floppy disks to people’s homes.

cep on February 6, 2014 at 9:56 AM

Suck it, AOL.

You bought HuffPo so I have little doubt you cheered on this train wreck 4 years ago.

Drown for all I care.

Bitter Clinger on February 6, 2014 at 9:57 AM

Insurers are facing pressure from regulators and lawmakers about plans that offer limited choices of doctors and hospitals

The administration is basically mandating that all insurers offer the exact same product…… but they can set “market rate” prices?
Yeah, I’m pretty sure nobody in the administration has ever run a business or even taken a course in economics.

Happy Nomad on February 6, 2014 at 9:59 AM

libfree must be so happy with all this redistribution going on.

Redistribution from employers to insurance companies.
Redistribution from the poorer young to the richer old.

Glorious future awaits!

gwelf on February 6, 2014 at 10:00 AM

AOL can slap a $10 fee every time their users dial up the phone for Internet

drivingtheview on February 6, 2014 at 10:02 AM

They can afford it

I Have No Political Leanings Whatsoever on February 6, 2014 at 10:02 AM

libfree must be so happy with all this redistribution going on.

Redistribution from employers to insurance companies.
Redistribution from the poorer young to the richer old.

Glorious future awaits!

gwelf on February 6, 2014 at 10:00 AM

The college board asked libfree if he would be willing to distribute some of his paycheck to the janitor and he said, “Aw gee look at the time, I really gotta go.”

Bishop on February 6, 2014 at 10:03 AM

Google, Yahoo, Microsoft, Oracle, Sun, Verizon, AT&T and a bajillion other companies aren’t going to eat the cost increases either. And any one of those companies is likely to see cost increases in the tens, if not hundreds of millions of dollars.

Remember in early Q2 2010, dozens of publicly traded companies followed SEC regs and accounting practice and announced billions in expected future writeoffs due to known costs imposed by Obamacare. Waxman et al went ballistic, threatening to haul CEO’s and CFO’s before Congress.

Conservative Mischief on February 6, 2014 at 10:04 AM

Maybe they can get some cash by recycling the billions of those 3.5 floppy disks and CD’s still lingering in gas stations up and down the east coast.

HumpBot Salvation on February 6, 2014 at 10:04 AM

Yes, but according to the Spite House, this is an AWESOME thing because it will eliminate “joblock”. Whatever that is.

ConstantineXI on February 6, 2014 at 9:47 AM

You’re sounding like an ingrate. Here the administration is offering you the opportunity to work less and pursue your lifelong aspiration of sculpting phallic totems or something….. and you’re complaining? Sure the cure for joblock is living at the poverty line and sucking from the public teat but you’re free!

Happy Nomad on February 6, 2014 at 10:04 AM

SJL will be sending Obama an engraved pen for the EO’s on this one.

docflash on February 6, 2014 at 10:07 AM

$7,000,000 is a LOT of Floppy Disks

kcewa on February 6, 2014 at 10:09 AM

You’re sounding like an ingrate. Here the administration is offering you the opportunity to work less and pursue your lifelong aspiration of sculpting phallic totems or something….. and you’re complaining? Sure the cure for joblock is living at the poverty line and sucking from the public teat but you’re free!

Happy Nomad on February 6, 2014 at 10:04 AM

What does it make me if I REFUSE to suck at the teat, but insist on WORKING for everything I have?

I know, that makes me RAAAAACIST!

ConstantineXI on February 6, 2014 at 10:09 AM

…so what?

KOOLAID2 on February 6, 2014 at 10:11 AM

What does it make me if I REFUSE to suck at the teat, but insist on WORKING for everything I have?

I know, that makes me RAAAAACIST!

ConstantineXI on February 6, 2014 at 10:09 AM

Well, a Fox News viewer for sure. Individualism and self reliance are not traits to be encouraged in the proletariat.

Happy Nomad on February 6, 2014 at 10:15 AM

la la la…la la la…no one can do anything about it.
The GOP is AWOL.

albill on February 6, 2014 at 10:16 AM

AOL must have bought Huff Po for SNEWS content.

AOL = Association Of Losers

KW64 on February 6, 2014 at 10:17 AM

In the words of an immortal american proverb ; Go figure.

Swedish Patriot on February 6, 2014 at 10:17 AM

To paraphrase Nancy Pelosi: ‘We had to pass it so that you suckers can see how much we’re going to screw you!’

GarandFan on February 6, 2014 at 10:17 AM

Sad State of affairs, We are all dealing with this 800LB Gorilla. But it seems to me that for AOL, this is a self inflicted wound. Perhaps the next itteration of health care reform will engender a tad more reality and a little less unicorns and rainbows in its creative process.

Endunamoo on February 6, 2014 at 10:18 AM

Not sure how anyone can believe that reducing competition will reduce costs to the end user. Oh, a spokesman for the healthcare industry is saying it…interesting.

I guess in AOL’s case they don’t have any customers so they have to either pass it to the employee or cut other benefits but real companies will just raise the price of their products or services and let their customers pay for it.

tej on February 6, 2014 at 10:19 AM

what is an aol?

devadevadasa on February 6, 2014 at 9:49 AM

Is that a serious question? AOL is America Online, which used to be big back in the late 90s, as an ISP. You used to be able to find their free install CDs almost anywhere.

rickv404 on February 6, 2014 at 10:23 AM

I don’t think I like all these noobs.

And God help them if they think they can come in here and Bishop! threads.

Lanceman on February 6, 2014 at 10:24 AM

Have not commented in a couple years. Have been reading since MM started.

Maytag redo on February 6, 2014 at 10:28 AM

Well, a Fox News viewer for sure. Individualism and self reliance are not traits to be encouraged in the proletariat.

Happy Nomad on February 6, 2014 at 10:15 AM

Yes, those traits are counter to the Glorious Revolution.

But I’m sure we’ll all have a great time in the Obama FUNeducation Camps.

ConstantineXI on February 6, 2014 at 10:34 AM

and then hotair will run out of material to bash the President on…that’s what you’re really afraid of, right?

nonpartisan on November 19, 2013 at 4:47 PM

But these Obamacare posts are about whistling past the graveyard, by next Novemeber Democrats will be openly running on the ACA. Mark my words.

libfreeordie on December 20, 2013 at 10:14 AM

Chris of Rights on February 6, 2014 at 10:37 AM

A bill that was designed to funnel more money to insurers and Big Pharma is causing costs to go up for others? Shocking.

The major question to ask is how may people will lose their insurance by November? A huge number could mean a seismic political shift.

macphisto96 on February 6, 2014 at 10:37 AM

OT: Has anyone outside of Indiana noticed this?

Senate Joint Resolution 3
Introduced Senate Resolution (S)
Authored by: Sen. James Smith
Third level navigation links – accordion
Authors / Sponsors

DIGEST

Rescind ratification of the seventeenth amendment. Rescinds Indiana’s ratification of the 17th Amendment to the Constitution of the United States.

Chris of Rights on February 6, 2014 at 10:43 AM

So? He didn’t build that. Tax ‘em back to the Stone Age.

gormmm on February 6, 2014 at 10:45 AM

This line right here:

“The Obama administration and Democrats on Capitol Hill are threatening insurers to restore provider networks”

Soon everyone in healthcare will work for the government.

bsinc1962 on February 6, 2014 at 9:48 AM

So, they do want insurers to fail.

Increase provider network = bankruptcy
Don’t increase provider network = Obama bankrupts you

It’s the typical lose-lose situation. Just as he planned.

Patriot Vet on February 6, 2014 at 10:46 AM

Chris of Rights on February 6, 2014 at 10:43 AM

It looks like the GOP is looking at it as well.

Patriot Vet on February 6, 2014 at 10:52 AM

Sadly, even with a policy from Obamacare, those few who bought polcies for the first time, and the millions forced to replace policies they LIKED will continue to see how expensive it is (deductibles are climbing 300%) and how difficult it is to see a doctor (networks are smaller and fewer docs will take medicare and even obamacare).

azpatriotsdotcom on February 6, 2014 at 10:55 AM

The EpicClusterFarkNado and the lies of the Obama Administration are going to keep on coming…

…Between September and Election Day this November, millions of Americans who have Employer provided health insurance coverage are going to get cancellation notices.

Also during this timeframe, insurers, looking at their losses from the first year of Obamacare’s exchanges, are going to be forced to increase premiums, already high, and decrease access, already shrinking significantly, to try to postpone their acceleration into a premium death spiral.

I suspect that by mid-2015, a majority of the insurance partners in the exchanges will be seeking an exit, despite the current promises and legislation that will ‘bail them out’. The price to remain connected to the EpicClusterFark will become far too great.

The only question remaining is when middle America will finally realize that the intent behind the ACA had nothing to do about ‘fixing’ healthcare and everything about seizing 1/6th of the national economy and placing it under the federal government’s boot for ‘social justice’ and wealth redistribution.

Athos on February 6, 2014 at 11:07 AM

Yet another example of why there’s no such thing as a tax on a business. Any cost to a business ALWAYS gets passed on.

sgpi on February 6, 2014 at 11:09 AM

Patriot Vet on February 6, 2014 at 10:46 AM

Never let a crisis go to waste…and don’t hesitate to create a crisis in order to create an advantage / window in which to act.

Athos on February 6, 2014 at 11:10 AM

AOL still exists? I kid, I kid. AOL has been struggling for quite some time. I doubt this is going to do them any favors.

But who am I kidding, as the President and the Nancy Pelosi are so fond of saying: this gives AOL a “choice”…to make less money and fire more employees. So, win, win? Am I right?

BobSagetsRevenge on February 6, 2014 at 11:13 AM

AOL made $600 million in 2012, $7 million is probably 1% of their net income moving forward. They can afford this, likely at the expense of shareholders. I am more concerned with the small business who wants to compete with AOL and has to pony up an additional 20-50% of their income to pay for this monstrosity.

Big companies will be the only ones who can afford to provide coverage and they will draw talented employees based on this. This kills small businesses more than big businesses. Entirely unfair since larger businesses were the ones who had the resources to fight this. It appears that they may not have been overly concerned since this actually helps big business by disproportionately affecting their smaller competitors.

While I don’t blame big businesses for complaining about the cost of big government, I have MUCH more sympathy for their smaller competitors who did not have the resources to fight this.

airupthere on February 6, 2014 at 11:34 AM

If you like your $7 million, we will keep your $7 million.

RUexperienced on February 6, 2014 at 12:07 PM

“We have to look at our benefits programs very seriously,” said Armstrong. “In the CEO chair, let me give you an example of the decisions we have to make as a company: Obamacare is an additional $7.1 million expense for us as a company. So we have to decide whether or not to pass that expense to employees or whether to cut other benefits.

President O would call that a FALSE CHOICE, and would say Mr. CEO should take a $7.1M pay cut.

PROGRESS-O-MATIC!

Marcola on February 6, 2014 at 1:00 PM

They can afford it

I Have No Political Leanings Whatsoever on February 6, 2014 at 10:02 AM

Open registration is still open. You can still change your name to reflect the truth…oh, I forgot, ignorant progressives couldn’t tell the truth from a hole in the ground. Carry on.

NOMOBO on February 6, 2014 at 1:50 PM

sgpi at 11:09

All taxes are income taxes. They can call them whatever they want, but someone’s final disposable is always less at the end of the exercise (though nothing can ever touch the progressive Orwellian nomenclature triumph: the tax on “unearned” income! Why shouldn’t we tax that however we want since you didn’t build, er, earn that).

cosifantutte on February 6, 2014 at 2:26 PM

AOL still exists?
BobSagetsRevenge on February 6, 2014 at 11:13 AM

That was my first thought as well.
Don’t tell me MySpace is still out there too…..

dentarthurdent on February 6, 2014 at 2:57 PM

“We have to look at our benefits programs very seriously,” said Armstrong. “In the CEO chair, let me give you an example of the decisions we have to make as a company: Obamacare is an additional $7.1 million expense for us as a company. So we have to decide whether or not to pass that expense to employees or whether to cut other benefits.”

It doesn’t take much thought to balance $7.1 M for O-care vs. $1 M in fines…. Companies will drop coverage like a hot rock for the short term gain.

NorcoPatriot on February 6, 2014 at 4:07 PM

Video: AOL CEO says ObamaCare adding $7 million to costs

The point to keep site of is that that $7 million isn’t simply evaporating…it’s going to end up in someone’s pockets somewhere, and it certainly won’t be ours.

Dr. ZhivBlago on February 6, 2014 at 4:17 PM

Soon as they fix the website, this problem goes away!!!

Right, verbaluce?

Uhh, verbaluce? You around?

Ed –
You mean the websites aren’t working perfectly on day one two three four five six seven eight nine ten eleven twelve thirteen fourteen fifteen sixteen seventeen eighteen nineteen twenty twenty-one twenty-two twenty-three twenty-four twenty-five twenty-six twenty-seven twenty-eight twenty-nine thirty thirty-one thirty-two thirty-three thirty-four thirty-five thirty-six thirty-seven thirty-eight thirty-nine forty forty-one forty-two forty-three forty-four forty-five forty-six forty-seven forty-eight forty-nine fifty fifty-one fifty-two fifty-three fifty-four fifty-five fifty-six fifty-seven fifty-eight fifty-nine sixty sixty-one sixty-two sixty-three sixty-four sixty-five sixty-six sixty-seven sixty-eight sixty-nine seventy seventy-one seventy-two seventy-three seventy-four seventy-five seventy-six seventy-seven seventy-eight seventy-nine eighty eighty-one eighty-two eighty-three eighty-four eighty-five eighty-six eighty-seven eighty-eight eighty-nine ninety ninety-one ninety-two ninety-three ninety-four ninety-five ninety-six ninety-seven ninety-eight ninety-nine one hundred one hundred one one hundred two one hundred three one hundred four one hundred five one hundred six one hundred seven one hundred eight one hundred nine one hundred ten one hundred eleven one hundred twelve one hundred thirteen one hundred fourteen one hundred fifteen one hundred sixteen one hundred seventeen one hundred eighteen one hundred nineteen one hundred twenty one hundred twenty-one one hundred twenty-two one hundred twenty-three one hundred twenty-four one hundred twenty-five one hundred twenty-six one hundred twenty-seven one hundred twenty-eight one hundred twenty-nine
verbaluce on October 1, 2013 at 10:18 AM

(H/T NotCoach)

There Goes the Neighborhood on February 6, 2014 at 4:30 PM

So the Dems are clamoring to force insurance companies to expand provider networks.

Pretty soon the regime is going to reinstate so many aspects of our pre-Obamacare world there will be no trace of Obamacare left other than the gigantic bill. And all this so a few million poor people could get Medicaid and a preexisting condition would be eligible for insurance. I could have solved that problem with my hands tied behind my back.

I live in a topsy turvy world.

Kimberino on February 6, 2014 at 4:58 PM

Heh… I used to work for AOL… and I met my wife in an AOL chat room. Ten year anniversary coming up…

“Welcome… You’ve got mail!”

PointnClick on February 6, 2014 at 5:00 PM