If the company is paying for the chat service, it's the company's chat, and the company owns the logs. It's no different than a work email address/inbox.

And if I'm running the company, I don't want my employees to have to go through loopholes to chat privately. The company owns the water cooler too but putting a mic into it is not ethical behavior.

The decision of whether or not private chat occurs in that situation is up to your company though, not the company you buy the water from. This policy change by Atlassian shifts the ability to set policy where it should have been in the first place (as they've noted): to the company purchasing access to HipChat.

So set a policy that you won't read their messages. There's nothing new here.

It's nothing but a policy that prevents your SaaS provider from reading your data in the first place.

Employees don't generally have to worry about their SaaS provider having an impact on their performance review, paycheck, or continued employment.

Then just don't look at the logs, or turn them off.

If you care about personal privacy, don't use your employer's servers, and don't host your private conversations on a third-party SaaS.

Really? An implied freedom in the US? I agreed with your initial post, but this one is ridiculous.