I don’t usually use props in my speaking engagements, but this one was just too good to pass up. Besides, I’ve kept that old printed version of the “American Health Security Act” (aka “Clinton care”) on my bookshelf for 16 years, just waiting for the right occasion. I wanted the audience to see that this wasn’t the first time Congress had dreamed up a 1,000-plus page behemoth of a bill to “fix health care in America.” Showing them the book and then dropping the giant volume on the table with a booming “thud” was great theater, but it was also a terrific preamble to my next point.
One by one, I ticked off the similarities between the 1993 attempt and today’s H.B. 3200, also known as “America’s Affordable Health Choices Act.” The Clinton effort embraced an employer mandate. It had Health Insurance Purchasing Cooperatives and a National Health Board. It would have restricted patient choice, albeit in a more overt manner than today’s legislation. It also called for a broad expansion of the role the federal government would take in the health care of its citizenry. The parallels between 1993’s effort and today’s are manifold and totally unsurprising since the same political ideology is behind both efforts.
Even the rhetoric has a familiar ring. “Our history and our heritage tell us that we can meet this challenge. Everything about America’s past tells us that we will do it ... Ask yourself whether the cost of staying on the same course isn’t greater than the cost of change.” It sounds like it could have come from President Obama’s speech to a joint session of Congress on Sept. 9 of this year. The quote is actually from a speech given by President Clinton 16 years earlier — eerily, nearly to the day.
The key takeaway is not that the defeat of the Clinton initiative presages a similar defeat this time. Remember that President Clinton’s plan never even got a committee vote. Today, we are awash in proposals. At the time of this writing the focus is on that omnibus House bill and the Senate effort delivered by Democrat Max Baucus. Given his party’s control of both houses of Congress it is unsurprising — yet disappointing — that we have only heard Democratic initiatives.
Democrats, however, aren’t the sole owner of the history of attempted health care changes in the U.S. Going back to Theodore Roosevelt, there have been nearly as many Republican efforts as there are Democrat attempts. Republicans, relegated as they have to being just so many legislative mimes, have offered 35 different bills in this Congress alone. All have been defeated in committee on party line votes.
Remember mutual fund salespeople?
Indeed, the U.S. National Archives is replete with historical precedents. We might do well to heed the words of William Shakespeare (Act II, Scene I of The Tempest) that are carved over the doors of those very archives: “What’s past is prologue.” It was in that context that I challenged my audience — largely comprised of agents, general agents and a smattering of company representatives — to think about how they would practice if this brave new world actually comes to pass this time around.
I asked them to consider the securities industry — specifically the marketing and sale of mutual funds — as an example. Traditionally, mutual funds paid a 6% or 6.5% commission to the NASD Registered Representative (salesperson) who sold them. Unlike the products we market, the commission was apparent on the very first statement received by the client. When investors wrote a $10,000 check to open the account, only $9,350 appeared on the top line of their first statement.
In the 1970s, technology and information made fund information accessible to investors (“consumers” in our medical world). Once they realized that many of the salespeople were doing little if any real “work” on their behalf, investors had little if any use for the salespeople. Annoyed at “losing” so much of their initial investment, and armed with these new tools, investors began to walk away from registered representatives. If you can do it yourself for nothing more than a bit of time and education, why pay for it?
DIY investors were a dedicated minority until the bull markets of the 1980s and ’90s when, according to Investopedia.com, “... mutual fund investments hit record highs and investors saw incredible returns.” Seemingly overnight, flocks of mutual fund salespeople became as obsolete as the card catalog in your local library. These were smart, dedicated individuals who had not changed what they delivered to the client, even as their product became more and more commoditized and the specialized information they attempted to deliver became easier — and cheaper — for their client to obtain.
If this sounds familiar, it should. This is in large measure what may happen to today’s health insurance agents and brokers. The major difference is that government is attempting to push the change in our industry while consumers pushed the change in the securities industry. I suggested to my audience that at the end of the day this was a distinction without a difference. Either way, the result is the same. If our industry had fewer hands stirring the pot, eventually, we may have had real consumers who would have arrived at the same destination in very much the same manner as our investment brethren.
So, where did those displaced securities sales people go? Many of them left the business to pursue other opportunities. According to many old hands who survived the change, approximately 10-15% of these salespeople became financial planners. Were some of them still selling mutual funds? Of course they were, at least in the early days of that profession.
What changed? These survivors understood that there was an opportunity inherent in the change. Bull markets, dot-com bubbles and other economic phenomenon meant that there were more and more consumers purchasing funds or getting into the stock market. Those folks could do their own research, but creating an overall financial plan was beyond their desire or scope. Picking a mutual fund, especially armed with research from Value Line or (later) Morningstar was one thing, but juggling considerations about taxes, liquidity, marketability, time horizons, risk, diversification and estate planning was impossible for nearly all investors.
Quick change
The rate of change in the D.C. health care “reform” lottery is accelerating. Technology is back to obeying Moore’s Law that capacity doubles every 18 months. When Moore offered his “law” he was talking about hardware. Today, the coin of the realm isn’t hardware; it is information on demand. Those of you who are “stuck on spreadsheet” and peddling a commodity rather than providing value to your clients, you are probably heading for extinction.
No matter what the Congress may say, as a pure salesperson you are considered “administrative expense.” As governments flatten our marketplace, whether by restrictive pricing and underwriting regulations or by standardization of product offerings, consumers will rapidly come to that realization as well. Why would I pay a commission if I can do research on the Internet and use conjoint analysis and comparison engines to choose a plan?
If we focus only on what happens in Washington, we are shortsighted. Inexorable and indigestible rate increases combined with a recessionary environment and consumers who know that there must be change may have created the perfect storm for our business. I suggested to my audience that rather than being the root cause of disruption among the sales force, Congressional action may merely be accelerating a change that has been coming for quite some time.
All will agree that change is happening at a much greater velocity than the slower consumer-driven changes in the investment community. Jack Welch, former CEO of General Electric, offers a warning for your organization that is as clear as Shakespeare’s and much more pointed: “If the rate of change on the outside exceeds the rate of change on the inside, the end is near.”