CFO Studio Magazine - CFO Innovation Award Winners

2nd QUARTER 2015 WWW.CFOSTUDIO.COM 41 “T he health care system is not broken— it is obsolete,” according to TimTeen, chairman and CEO of Trendline Management Group, a New Jersey–based organization that works with consultants, brokers, and third-party administrators to create sustainable, cost-effective benefits programs. “As health care costs continue to escalate, an increasing number of companies are considering some form of self-insurance.” That trend is reflected in the U.S. Department of Labor’s 2014 Self-Insured Group Health Plans Report, which notes that between 2001 and 2011, the percentage of plan participants covered by self-insured or mixed-funded plans rose from 75 percent to 83 percent. “Large companies with 5,000 or more employees are already largely self-insured,” says Teen. “But so-called middle-market companies, with 100 to 2,500 employees, are likely to be the next wave.” A self-insurance health care approach is not an all-or-nothing proposition, he notes. Instead, companies work with trusted advisors to determine a risk-management strategy that utilizes stop-loss and other insurance policies to achieve reasonable cost reductions through a balance: saving on premiums by covering health-care-related costs to a certain level themselves, while paying some premiums to insure against catastrophic costs. “Under Obamacare, certain taxes and restrictions may be avoidable with self- insurance,” Teen adds. “Each company has unique circumstances that need to be considered. It’s not an across-the-board solution, but with an appropriate review and a well-balanced approach, the savings may be considerable.” C Reducing the Health Care Spend KNOWLEDGE TRANSFER What Are You Doing to Grow? C ompanies not growing, or at least evaluating growth opportunities, are probably falling behind their peers, according to Gerard DiFiore, partner at Reed Smith, LLP, a global law firm. Even companies in industries with slow revenue growth should properly position themselves, in case an opportunity presents itself. Such a growth opportunity is especially likely now, in a “heated up” M&A environment, with many assets being sold in auction-style deals at high price multiples. “Companies in an environment like this need to think about all the implications and all of the factors that go into an M&A decision,” says DiFiore. On the question of whether an organic or M&A approach to growth is the best fit, DiFiore says it comes down to whether or not a company has the talent and technology inside its current organization to make organic growth workable. If not, “an organic strategy will be a much more difficult, time-consuming, and risky strategy than an M&A approach.” Another factor executives must consider: whether the target customers in the new business are people with whom the acquirer already has a relationship. If they are, then organic growth makes sense — adding a new product or service that would appeal to these pre-existing customers. If they are not, then an acquisition might make sense — acquiring a company that offers a pathway into this customer base. “The question comes down to, ‘Is the sales channel something you have in place or does it make more sense to buy the sales channel?’” says DiFiore. “Look at all the barriers to entry related to a particular expansion plan and evaluate which ones can be overcome by existing resources.” C Visit www.CFOstudio.com to read more about the presenters