Labor Pains

It happens every eight seconds in the United States, and it costs employers billions of dollars each year.

The U.S. Census Bureau estimates the civilian population at just more than 317 million people and counting with a new baby added as each eight seconds tick by. Childbirth is a large part of employers’ health insurance costs, and, according to a study by the March of Dimes, accounts for seven of the top 10 individual hospital procedures billed. With 1.7 million women in the workforce having a baby each year, the national healthy pregnancy advocacy organization estimates employers spend $12 billion annually in preterm baby health care costs alone.

AOL Inc. (NYSE: AOL) CEO Tim Armstrong recently found himself at the center of a media firestorm after his comments about “distressed babies” adding to company health care costs provoked outrage from employees and mothers nationwide. During a Feb. 7 public address on the company’s fourth-quarter results, Armstrong outlined company 401(k) changes due to astronomical health care costs, citing million-dollar bills for two employees’ preterm babies covered by the media conglomerate’s insurance plan. The phrasing sparked such outrage, that two days later Armstrong issued a companywide memo apologizing and reversing the 401(k) change.

“When a large, self-insured corporation like AOL has shock claims such as these, it will drastically affect health insurance expenditures,” said Leslie Peck, owner of Peck’s Insurance & Financial Services Inc. and president of the Springfield Association of Health Underwriters. “This is money the company has to pay out of pocket to cover that cost.”

Employee pregnancy costs are compounded for employers when maternity leave is factored in, including potential paid time off and loss of production. However, the maternity and paternity leave problem is one many businesses avoid. According to the Institute for Women’s Policy Research, the U.S. is one of only four countries globally, and the only high-income country, without a statutory right to paid maternity or paternity leave for employees.

Little baby, big cost
AOL’s Armstrong might have gotten backlash for his comments, but his figures weren’t wrong.

According to the March of Dimes study, almost 11 percent of babies covered by employer health plans are born premature, and employers pay nearly 12 times as much in health care costs for premature babies compared to babies born without complications.

Springfield March of Dimes Director Sharyn Dawson estimates about 80,000 babies were born in Missouri last year. Of those, about 10,000 were born premature.

“It costs an employer as much for one preterm baby as about eight healthy babies,” she said.

The study estimates the average medical cost for a healthy, full-term baby from birth through the first year is about $5,085, of which $4,389 is paid by an employer health plan. The average medical cost for a premature baby is $55,393, of which $54,149 was paid by the health plan.

“Pregnancy is a large driver of health insurance claims in the workforce, but it’s not something you can prevent,” insurance agent Peck said. “There is no way to know a claim of that nature is coming.”

Peck said while preemie claims significantly affect companies such as AOL, smaller businesses typically feel less burden.

“Around here, most insurance plans are backed, so the company doesn’t directly pick up the cost out of pocket,” she said. “However, the more claims you have on a plan, the higher the premiums will be and that cost will most likely be passed down to employees.”

Peck said insurance companies typically factor childbirth costs into a plan estimate based on employee demographics. For companies with high numbers of childbearing-age employees, Dawson preaches education as a key to reduce company cost.

“At times, there is nothing a company or mother can do to prevent premature birth, but with the right education, sometimes there is,” she said, pointing to the March of Dimes Healthy Baby, Healthy Business program. “When the information is out there, you can watch for signs and avoid trouble spots.”

Take it or leave it
The federal Family and Medical Leave Act has long granted up to 12 weeks of unpaid leave to all new mothers and fathers. However, paid leave is a different story. A soon-to-be mom is lucky to get any paid time off, and dad can usually forget the option.

The same isn’t true internationally. A recent in-depth study by the Los Angeles Times found maternity benefits around the world are drastically different.

Canadians get up to 50 weeks of maternity leave at 45 percent pay, the Swedes offer up to 60 weeks with 80 percent pay, and even the communist nation of Russia offers 20 weeks off at 100 percent pay. Denmark ranks as most generous to new moms, with a full year off at 100 percent pay.

Some local companies are bucking the American trend in favor of a more international approach to childbearing.

“We look at maternity and paternity leave as a matter of standard employee benefits,” said Ashley Dees, administrator with Springfield Nephrology Associates Inc. “Companies focus too much on the bottom line, but they overlook their most valuable asset – human capital.

“You can’t quantify human capital on a balance sheet so it’s easy to forget, but regardless of the size of your business, that asset should be protected and valuable above all else.”

Dees said SNA offers up to 45 days of paid maternity and paternity leave for all employees, citing a top-down approach to management.

“Our leadership puts family first regardless of gender or lifestyle,” she says. “Of course, there is a cost to offering this benefit, but SNA prepares in advance.

“The way I see it, we are going to pay those paid-time off days now or when they leave, so that’s not a factor. We cross-train all our employees and prepare in advance for a leave so there is no loss of production.”

In the two years since Dees has been with SNA, she said two employees have taken advantage of the company policy.

Since the U.S. lacks a standard maternity or paternity leave policy, the decision is left up to individual employers, something Dees said can be a factor in attracting the best applicants.

An Institute for Women’s Policy Research survey of registered voters conducted in 2010, produced with support from the Rockefeller Foundation, found public opinion in favor of family and medical leave policies. Three out of four endorse laws to provide paid leave for family care and childbirth. By gender, 81 percent of women and 71 percent of men surveyed would support a national policy.

“It’s a matter of morale,” Dees said. “We can all think back to a time when we needed help. The maternity and paternity leave program is designed to help.

“Fostering goodwill toward the company may have an initial cost, but it will pay dividends in the company’s future.”