By Jason Bramwell, Staff Writer
A recent survey of nearly 100 US financial executives by Deloitte LLP found that 42 percent of respondents pointed to the Affordable Care Act as the reason they had to pass further health care costs on to their employees during the fourth quarter of 2013 – and 63 percent are planning to do so this year.
For companies shifting costs to personnel, the top tactics that are being used by CFOs include higher premium contributions (74 percent), increased deductibles (72 percent), and increased copays (49 percent), according to the Big Four firm’s fourth-quarter 2013 CFO Signals survey.
Deloitte’s quarterly survey tracks the thinking and decisions of ninety-six CFOs from organizations averaging more than $7 billion in annual revenue.
The Affordable Care Act forced CFOs to take other health care-related actions during the last quarter of 2013 that have impacted their businesses, according to the survey. Only 10 percent of respondents added health care coverage for employees who were not previously offered benefits, while zero CFOs raised the level or value of coverage to any of their staff.
However, the percentage of financial leaders who reduced earnings forecasts or did not hire new personnel because of the Affordable Care Act are low. Thirteen percent of CFOs stated they decreased their earnings outlooks, and another 13 percent reported health care coverage levels and scope have been reduced. Eight percent of respondents said they have constrained hiring, while 4 percent shifted toward part-time staffing.
Overall, the survey found that 54 percent of CFOs expressed improved optimism about the prospects of their organizations versus 21 percent who expressed declining optimism. Deloitte reported this is the first time optimism has remained net-positive for an entire calendar year since the CFO Signals survey began in the second quarter of 2010.
But despite this increased confidence among CFOs, the survey suggests they expect substantial challenges in this new year. Expectations for sales growth reached a survey-low 4.1 percent, falling from 5 percent the previous quarter. Earnings growth projections did increase from 8 percent to 8.6 percent from the third quarter; however, this expectation remains far less than the survey’s nearly four-year average of approximately 12 percent, Deloitte reported.
“Internally, optimism remains strong, and organizations continue to believe they can grow margins,” Sanford Cockrell III, national managing partner of Deloitte’s CFO Program, said in a written statement. “But externally, CFOs remain troubled by uncertain economic growth and slow progress in Washington, DC, even with the recent budget deal. With risk, rationalization, and cost concerns back on the table again, it seems many organizations are not hitting the gas as they enter 2014.”
Finance executives expressed rising confidence in the US economy in recent quarters, but the trend has now reversed. According to the fourth-quarter survey, 26 percent of respondents believed the economy is “good,” a decrease from 38 percent last quarter.
CFOs also expressed high levels of concern regarding government economic policy, regulation, and the effects of the potential end of quantitative easing. Industry-specific regulation was cited as a huge impediment by 45 percent of CFOs overall, with the highest prevalence in the health care/pharmaceutical (67 percent), services (63 percent), and financial (54 percent) sectors.
“This is the first quarter in which CFOs have voiced strong concerns about the near and long-term impacts of the US stimulus program,” said Greg Dickinson, director of the Deloitte North American CFO Signals survey. “The prospect of the Federal Reserve tapering and eventually ending its bond purchases is clearly causing concerns about the future of capital markets, economic growth, and customer demand.”
CFOs also reported that business-support metrics are their most important finance measures, led by internal client satisfaction scores (24 percent), achievement of plans and budgets (22 percent), and forecast accuracy (21 percent). Also among the most-mentioned measures are quality of financial reporting and finance costs.
About the survey:
The Deloitte CFO Signals survey was conducted for the fourth quarter of 2013 between November 8 and November 22. Seventy-nine percent of the ninety-six CFO respondents were from organizations with more than $1 billion in annual revenues, and 68 percent were from publicly traded organizations.