"Distressed babies"—that's the reason why AOL decided to cut 401(k) contributions according to chief executive, Tim Armstrong.

During a town hall meeting with employees last week, Armstrong discussed the company's plan to address increasing health care costs under the Affordable Care Act. To prove his point, he cited two employees' situations as examples of high-spending.

"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 O.K.," Armstrong stated, according to a transcript released by an employee.

Deanna Fei, mother of a baby that Armstrong referred  and wife to an AOL employee, published an opinion piece in Slate which described the family's situation and her own outrage at Armstrong's use of her daughter to argue his position. Fei's daughter was born prematurely before placed in intensive care, barely holding onto life. She expressed anger against Armstrong's implication that saving her child's life was, "an extravagant option, an oversize burden on the company bottom line," as if, Fei wrote, the family had planned to have an unhealthy daughter and a "high-risk pregnancy," as Armstrong put it.

"We experienced exactly the kind of unforeseeable, unpreventable medial crisis that any health plan is supposed to cover," Fei pointed out.

In a weekend email, Armstrong announced that he was reverting to the original policy, admitting that he mad a mistake and apologizing for his remarks. Last week, the company reported multi-million dollar profits in its fourth quarter—$36 million in net income and $679 million in revenue. Armstrong said that the Affordable Care Act would add $7.1 million to AOL's expenses.