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-insure, or they're incompetent.
Either way, it's crazy to set yourself up as an insurer and then complain about having to pay claims. That's kind of the point.
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.
Yes - there is a middle ground for self insured companies called a stop-loss provision. Companies can still get lower premiums through being self insured, but are also covered against huge losses over a specified amount.
In addition to the horrible way this was handled by management, this is clearly the failure of the AOL benefits team, who exposed AOL to more risk than it was actually prepared for.
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-insure, or they're incompetent.
Either way, it's crazy to set yourself up as an insurer and then complain about having to pay claims. That's kind of the point.