AOL Fallout: What Your Employer Really Knows About Your Health

Tim Armstrong, CEO and Chairman of AOL Inc. Photo: Kevork Djansezian/Getty ImagesWhen AOL’s Tim Armstrong unceremoniously blamed specific employees and their high-priced “distressed babies” for rising company costs last week, he set off a major media firestorm that didn’t begin to wane until he reversed course and apologized. Still, the controversy (and a subsequently buzzy, passionate essay from one of the singled-out parents) has most likely left many Americans worried: How much do their employers know about their own expensive healthcare needs?

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Officially speaking, not much, notes Bruce Elliott, compensation and benefits manager at the Society for Human Resource Management, a national professional organization based in Virginia. “Your health information is protected by HIPAA,” he tells Yahoo Shine, referring to the federal Health Insurance Portability and Accountability Act of 1996, which protects the privacy of individually identifiable health information. “So HR managers get what the plan paid out, but on a blind basis. We wouldn’t know that employee Tom had a heart attack, but we would know a heart attack occurred and what the cost was. Insurers are not allowed to report back with names.”

That said, “By process of deduction, if I knew so-and-so was pregnant and that someone at the company had a C-section, then sure, absolutely, I would know who it was,” Elliott admits.

More on Yahoo: AOL CEO Sorry for 'Distressed Babies' Remark; Reverses Retirement Plan

And that’s how AOL folks, Armstrong included, could have figured out who was “responsible” for the high preemie costs when the CEO made his now-infamous statement to employees at a town hall meeting.

“Two things that happened in 2012,” Armstrong said. “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.”

Armstrong apologized and went back to the company’s old benefit plan by Sunday. But still, his original statement was a case of using personal knowledge that many critics, especially mom-in-question Deanna Fei, argue should not have been used publicly to make a fiscal point.

“I take issue with how he reduced my daughter to a ‘distressed baby’ who cost the company too much money,” wrote Fei, the wife of an AOL employee, on Slate. “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.”

She continued, “For me and my husband—who have been genuinely grateful for AOL’s benefits, which are actually quite generous—the hardest thing to bear has been the whiff of judgment in Armstrong's statement, as if we selfishly gobbled up an obscenely large slice of the collective health care pie. Yes, we had a preemie in intensive care. This was certainly not our intention. While he’s at it, why not call out the women who got cancer?”

HR managers can also be privy to which employees have certain expenses, Elliott explains, because of the employees themselves, when they need help ironing out issues with their insurance coverage. “But that’s voluntary,” he says, adding, if an individual supervisor comes to him and asks, “ ‘Who’s getting sick the most in my department?’ I can’t tell him that.”

Companies that would most want to keep tabs on the biggest health costs, or “shock claims,” are those that are self-insured (like AOL), rather than fully insured, he adds. That’s because those big costs—spinal fusions, open heart surgeries, preemie care—drive up premium payments for stop-loss insurance, which pays employees’ medical bills after the company has reached a predetermined payout limit.

It’s extremely rare to hear about employees with big medical bills being driven out of their jobs, Lance Haun, HR expert and blogger, tells Yahoo Shine. Still, it’s possible companies try to stanch healthcare money flow in other ways. “I think it does drive employers to bring in younger workers,” he says.

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