What AOL’s CEO Got Right About Childbirth In America


AOL CEO and Chairman Tim Armstrong came under fire last week for attributing the company’s decision to modify its benefits package to the high health care costs of two “distressed babies,” which, he claimed, cost the company “a million dollars each to make sure those babies were OK in general.” The public uproar caused Armstrong to reverse the benefit changes and apologize. But even the CEO’s loudest critics recognized that he wasn’t entirely in the wrong.

The wife of an AOL employee who Armstrong indirectly singled out rightly condemned the company head for publicizing “the most searing experience of our lives” and using a little girl’s birth “as a scapegoat for cutting corporate benefits.” But she too acknowledged that the high cost of American childbirth has become a serious problem.

“[T]he 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,” Deanna Fei wrote in Slate. “I have no expertise in health care costs, but I have a 3-inch thick folder of hospital bills that range from a few dollars and cents to the high six figures (before insurance adjustments).”

Expensive pregnancy and child care has become a national crisis. America spends the most on childbirth but experiences some of the worst outcomes. For instance, the U.S. ranks last out of 130 industrialized nations in the world for rate of preterm birth, see one in nine babies born prematurely, suffer from the highest first-day infant death rate in the industrialized world, and lag far behind other wealthy nations in other indicators of maternal health.

On the whole, the March of Dimes has given the U.S. a grade of “C” for its overall approach to treating premature babies.

“Childbirth and newborn care together are the most expensive medical conditions billed to employer-based insurers,” said Dr. Jennifer Howse, the president of the March of Dimes. “By investing in the prevention of preterm birth, employers can help families and rein in their health care costs at the same time.”

The organization cites limited access to health insurance, elective deliveries and high smoking rates during pregnancy for the low grade and high costs. It estimates that premature births cost employers more than $12 billion, with a single premature or low birth baby averaging $55,393 ($54,149 of which is paid out by the employer). Full-term babies average $5,085 in the first year (of which $4,389 is paid by employer health plans).

So Armstrong’s concerns about high cost pregnancies is fundamentally true, even if his connection between the two “distressed babies” and the company’s increasing benefit costs is far less certain. Fortunately, the Affordable Care Act — which Armstrong also claimed would cost AOL $7.1 million — may actually reduce the overall price tag of premature births by providing more women with access to preventive and maternity care, as well as by increasing access to contraception coverage to avoid unwanted pregnancies in the first place.