Rationing the MVNHS©

In response to yesterday's post on the apparent death-spiral of the Much Vaunted National Health System©, frequent (and valued) commenter John Fembup observed that this is not really news; in fact, Dr David Owens (former chief of the Service) noted the likely future 40 years ago:

"The National Health Service is a rationed service. There will never be a government or a country that has enough resources to meet all the demands any nation will make on a national health service."

That quote, by the way, comes from a report of the annual meeting of the National Academy of Sciences in DC in 1976.

It should come as no surprise to regular IB readers that what Dr Owens observed must, in fact, be the case. Almost 6 years ago, co-blogger Bob explained it in easily understandable economic terms:

"The economics of goods and services can be reduced to simple demand and supply. Health care is no different. It follows economic theory just like every other consumer good.At either extreme you have inelastic price curves and elastic curves. Most consumer items track a bell curve but some things are totally elastic or totally inelastic."

That is, health care is, in fact, a good and a service (depending on whether you're talking about a cast, or the orthopedist affixing it to your arm). Regardless, there is only so much of it at any given time (there's not an endless supply of cardiologists, for example). And folks who deliver health care expect to be paid for their services, as those who supply bandages and syringes expect to be paid for their products. How much we're willing to throw at a given patient then becomes an issue.

When the cost of health care is perceived to be free (as in a nationalized scheme), the demand is going to go up. But from where do the funds come to pay for unlimited services and supplies?

One could ask Venezuela about that, no?

MVNHS© Circling the Drain?

While prognosticators opine breathlessly on the potential Halbig/King/Burwell fallout, it may be instructive to cast our eyes eastward to see how Britain's Much Vaunted National Health System© is faring:

"NHS may be forced to abandon free healthcare for all, says Britain's top doctor"

Wait, what?

That can't be good.

Surely he's overstating the case, right?

Not so much:

"If the NHS continues to function as it does now, it’s going to really struggle to cope because the model of delivery and service that we have at the moment is not fit for the future."

Turns out, if something's "free" it's likely to be much in demand, and you know the old saw: "You can have it fast. You can have it cheap. You can have it good. Pick two."

Under a nationalized health are scheme such as the MVNHS©, it's readily apparent that the folks in charge have long opted for the first two. Now, they're even failing at least one of those, which does not bode well for the average Brit.

Interestingly, the good doctor is calling for a more holistic delivery approach, with services more centrally located and delivered. Now, how - or even if - that can be accomplished becomes the next big challenge.

Health Wonk Review: Decade edition

The venerable Health Wonk Review celebrates its 10th anniversary, and I can think of no one more fitting to present it than David Williams. His own blog also turns 10 this weekend (we beat him by a month), so he's a natural to host this very special 'Review.

No fees, please

Over at LifeHealthPro, Craig Gottwals has a very interesting take on the role of fees in the age of MLR (Medical Loss Ratio). Craig's an attorney specializing in health care law, so what he says has a lot of credibility.

In a nutshell, one of the challenges facing agents in the fully insured large group market (where most of the whole fee discussion takes place) is how employers and their agents deal with the annual rate increases. Traditionally, it's not been unusual for the employer to pay his agent a fee for procuring coverage, and the agent then negotiates with the carrier to deduct the cost of commissions from their premium calculations.

Alternately, the agent might agree to a simple commission reduction (although this might be classified as rebating, but that's another post).

Regardless, the goal is to find a way to lower premiums.

Craig asks a simple question: Will this strategy still work in the age of MLR?

The short is answer is "No," but I really recommend reading the whole thing. There's precious little insider lingo, and he does a great job of explaining why this arrangement is not only spinning wheels, it can actually put you in reverse.

Recommended.

Green Mountain State gets $Grubered

Our old friend Jonathan Gruber just scored the equivalent of 64,000 cups of steaming hot, delicious coffee:

"In a 54-page memo, Vermont State Auditor Doug Hoffer confirms that embattled Obamacare architect Jonathan Gruber overbilled the state ...  Gruber himself apparently pocketed at least $48,000 of the $80,000 the state of Vermont has already paid"

Hope he also stocked up on some de-caf.

Open Enrollment...yet again....

Like the Feds, Covered California has announced another special Open Enrollment period.  This one runs from today through April 30.  Eligible consumers must indicate on their application that they were unaware of the tax penalty for going without health insurance.  It doesn't appear to require that you were uninsured in 2014.  

Since the application also includes a statement about the accuracy of the submitted information, the applicant also certifies that he or she is a blithering idiot or doesn’t watch TV, listen to the radio or know how to read.

More Delays on HRAs

Technically, Health Reimbursement Arrangements (HRAs) aren't "insurance" at all, but a means to provide tax-advantaged financing of health care. Unlike Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs), HRAs are entirely employer-financed; they're like an employer-provided health care gift card.

Until the ObamaTax, HRAs were also quite flexible in how they were set up and for what they could be used. For example, pre-ACA, small employers could fund "standalone" HRAs that allowed employees to pay for privately purchased health insurance (among other things). This encouraged employees to buy the plan best suited to their needs, and employers could control costs because they weren't beholden to a group carrier's annual rate in creases.

Sadly, those days are gone.

One of the ways that these plans have been affected is increased taxation. Under the DC-enforced ObamaTax regulations, so-called "standalone" HRAs are subject to a pretty hefty excise tax. The good news (for certain values of "good") is that the IRS has graciously granted a (temporary) reprieve:

"The Treasury Department ... will delay enforcement of an Affordable Care Act prohibition relating to standalone health reimbursement arrangements until July 1"

Gee, how generous of them.

Oh, and that excise tax? $100 per employee per day (of non-compliance).

Ouch.

Naturally, I turned to our local Gurus of all things HRA (and FSA, and HSA), the folks at FlexBank, for their take:

"The deal is, the taxes are still coming, it’s just been delayed."

Pay me now, or pay me later. So sayeth DC.

Three Strikes...

Pamela Weldon played by the rules, and for her efforts, she's outta luck:

"[CoOpportunity]'s liquidation marked the third time she would lose her health insurance under Obamacare, the third time she would head to HealthCare.gov to shop for coverage, and the third time she would have to purchase a brand new plan."

On the bright side, she now has an extra coupla months to sign up (maybe), but woe unto her if she has any claims in the meantime. She believed the lie that if she liked her plan, she could keep it; suffering from carpal tunnel syndrome for over a dozen years, she was satisfied with her Humana plan, but was forced to find a new ObamaPlan when her plan was cancelled.

No problem, thought she, and headed to the 404Care.gov site, where she attempted - for two months! - to obtain coverage. She finally got coverage from CoOpportunity, and we all know how that turned out.

She also believed the lie that "if you like your doctor, you can keep your doctor:" as with all the ObamaTax promises, this one had an expiration date. Turns out, her regular physician wasn't in her new plan's network. Luckily for the 58 year old Ms Weldin, though, her plan did cover birth control convenience items.

It actually just goes from bad to worse: her plan of choice was no longer offered, then the carrier itself assumed room temp. She eventually found a plan that included her preferred doc, but at a much steeper rate.

But hey, that's the new paradigm, no?

You have GOT to be kidding me

Really? They're going to do this?

"The Obama administration will hold a second enrollment period for ObamaCare this year ... The enrollment period will run from March 15 to April 30."

They're just trolling us now.

Here's my question: why arbitrarily cut it off in April? Why not just open it year 'round? That way no one will have to pay any penalty fine tax. Better yet, it means that you can just wait to buy your insurance in the ambulance.

Makes sense to me.

Co-Ops circling the drain?

Was Hawkeye state-based CoOpportunity Health's rapid growth - and even more rapid decline -  a harbinger of things to come? We've wondered about the Co-Op model for a while:

"The Freelancers Union, which provides health insurance to 25,000 of its members in New York State, is ending an experiment in providing low-cost insurance to independent workers"

That little "experiment" cost thee and me over $340 million. So, what does the future hold for these insurance company wannabe's?

Over at Forbes, Dr Scott Gottlieb posits that it's not likely to be very bright, and worrisome:

"The co-ops aren’t dying only because they were hastily constructed, or poorly managed. Their disaster is far more willful and deliberate. They meant to lose money."

Interesting take. But what possible motivation could there be to purposefully back a loser?

Well, if your actual end goal is single-payer (as we've maintained all along), then it begins to make sense.

A lot of sense.

Co-blogger Patrick adds:

This post from UPenn's Institute of Health Economics adds some financial perspective on the scope of the problem:

"The “combined ratio,” across all plans, is 116.8%, which corresponds to an underwriting loss of about $17 per $100 of premiums"

Hard to stay afloat when you're hemorrhaging cash. Or put another way:

It's a Trap!

The Pareto Trap (or Principle) is also known as the 80/20 Rule:

"[F]or many events, roughly 80% of the effects come from 20% of the causes"

In business, it's an aphorism that 20% of one's customers account for 80% of one's headaches.

Another way to look at it is that attempts to improve one thing (eg gas mileage) will also incur negative consequences (eg safety). And so it is with health care:

"A Pareto improvement was promised by the president at the launch of his signature reform. “If you like your doctor, you can keep your doctor” ... To lower costs, i.e. make health insurance more affordable, insurers limit the physicians in their network."

This is the trade-off for access to insurance versus access to care. It precisely exemplifies our longstanding meme here at IB: health care is not health insurance. I would add the following codicil:

"Making health insurance more available will, of necessity, make it more expensive."

The proof of this, of course, are the subsidy and cost-sharing schemes: if guaranteed issue insurance which immediately covered pre-existing conditions was "affordable" (as in PP"A"CA), then there would be no need for them.

Common sense, really.

Reality, what a concept

Schadenfreude, it's what's for dinner:

[click pic to embiggen]

IANAL but...

Consider this:

"[T]he Obama administration has gone to extraordinary lengths to partner with churches and other faith-based groups, even publishing sample church bulletin inserts, flyers, and scripts"

And for what purpose are they "partnering?"

Well, to push folks to sign up for ObamaPlans.

I am not a lawyer, but doesn't that conflict with this:

"Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof"

What am I missing?

Stupid Claims Rep Tricks

Over the years, our Stupid Carrier Tricks series has garnered quite a few eyeballs. The carriers, though, rely on individuals to carry out the work; in the P&C area, claims are generally handled by claims representatives (aka "adjusters"). Law-blogger (and longtime FoIB) Eric Turkewitz has a fascinating, frustrating post up about a weaselly Allstate Rep with a snarky attitude and faulty brain filter:

"A snarky email from an Allstate adjuster may cost the company $900,000 ... especially since the defendant had a problem with its expert."

Eric makes often complex legal issues easily understood, and you can't help but smile at his take on the adjuster.

Recommended.

Gaming Obamacare is Easy

Over at The Federalist I wrote an article showing five ways for individuals to legally game Obamacare. These loopholes show ways of saving money by simply using other people's money.

Be sure to check it out here.

404Care.gov Speedbump

So as Open Enrollment 2.0 winds down, this should come as no surprise to anyone that's been paying attention:

"A technical problem that had been interfering with sign-ups for [an ObamaPlan] has been fixed, officials say. Any consumer whose enrollment was hampered by the glitch will be provided with a special enrollment period."

Which is interesting, since the law recognizes only a few, specific situations that would trigger such an exception, and website "glitches" ain't one of them.

'Course, flouting the actual law hasn't seemed all that relevant to this crew in the first place (cf: subsidies in non-State-run exchanges).

Friday Afternoon Linkfest

■ If you're a current or former Anthem insured (or employee), the beleaguered carrier is offering a series of Town Hall meetings to "[t]o review what we know and share with you what we're doing at this point."

On hand will be Chief Info Officer Stacia Grosso and Ken Goulet, Commercial and Specialty Market honcho.

Aside from these Town Halls, Anthem's also arranging for complimenatry credit monitoring for those affected by the cyber attack. Click here for more on that.

■ Speaking of commercial business, employers will be delighted to learn that the IRS [ed: ever notice how, of you take out that space, it becomes theIRS?] is about to ship out the new Form 1094-C, which "employers are supposed to use to tell the IRS whether they offered workers minimum essential coverage (MEC), and Form 1095-C, which is the form employers are supposed to use to tell the workers themselves whether they had or were offered MEC."

Oh goody.

■ And finally, just in time for Valentine's Day, this reminder from Dame Nancy McBotox Pelosi that, in lieu of flowers or chocolate, one should instead urge loved one's to sign up for an ObamaPlan.

See, romance isn't dead (it is, apparently, quite under the weather).

Turning Tables Again

Recently, an outfit in The Pelican State asked me to share my thoughts on the value of health insurance. I was one of a handful of industry experts who gave for our Top 3 Reasons for having health insurance.

As far as I could tell, I was the only actual insurance person included (there was a nurse and a journalist/author, for example), which I found quite interesting.

Anyway, some interesting answers and less overlap than I'd have expected.

[And Thanks! to Alex T]

Stupidest Idea of the Year: An Early Frontrunner

Long Term Care insurance (LTCi) is arguably the single most complicated product we sell (tied perhaps only with Disability Income plans). It has a lot of moving parts, a very specific market niche, and is easily misunderstood. Underwriting is particularly involved because, unlike, say, life insurance, there can be multiple claims of varying degrees. The tax implications can be confusing and complicated, particularly for business owners. There are different ways that carriers count off their elimination periods, and how they price and define shared plans. And so on.

So naturally, Rocket Surgeon Paul Forte, CEO of some outfit called Long Term Care Partners L.L.C, thinks it would be a grand idea to market LTCi plans through Exchanges modeled on the ever-so-successful 404Care.gov site.

Really!

One can see why he'd like that to happen: his company is the admin for two major Federal insurance programs, and one can never have too much of that sweet, sweet gummint largesse. That they would no longer feel the need for, oh, agents or underwriting is just icing, really.

Wait, what?

No, seriously:

"Allowing some medical underwriting could hold down costs without leading to a rate spiral, and keeping costs low could help make a big exchange sustainable even without the help of a mandate."

Yes, he's proposing the "Affordable Long Term Care Act" - because we've seen just how successful the ACA has been in reducing costs, not to mention folks' access to actual care.  And did you notice that interesting little turn of phrase: "help of a mandate?"

Remember when we were warned, during the initial SCOTUS fight, that if the government can force us to buy health insurance, they can force us to buy anything? That was dismissed as silly then.

Still sound silly now?

Didn't think so.

But wait, there's more:

"Forte would further reduce costs by putting the LTCI exchange system under the jurisdiction of the federal government, not state governments"

Yes, because Lord knows that the Feds are well-known for reining in costs and keeping to a tight budget. Heck, I bet he could reduce the cost of Long Term Care insurance by 3000%.

And what about that whole direct-to-the-public marketing scheme? Let's unpack that a bit:

"Those objecting to what they think will be lost by foregoing the services of live agents should recognize that the ALTCIP would not be geared to high-net-worth individuals, but rather to moderate-income persons seeking better value"

Well first, Mr Genius, high net worth folks already have plans in place, and many can afford to self-insure. They're also likely to have easy access to loads of expert advisors and financial planners. Long Term Care coverage is specifically geared towards middle class folks who don't have that kind of access, and to whom, for example, the Partnership Program is a real boon (does he seriously think that high net worth individuals worry about Medicaid spend-down?). These are exactly the kinds of folks who need agents to help them understand the difference between, for example, service and calendar days.

There is literally nothing positive or useful in this proposal; it is simply an embarrassingly naked attempt to grab a few more DC dollars, and to further damage the middle class.

Wonder if he thanked Ms Bell for the free advertising.

Health Wonk Review: VD edition is up...

VD as in Valentine's Day. Peggy Salvatore has a new blog (WooHoo!), and this week's eclectic round-up of health care policy and polity.

It's chock full of great posts - Sweet!

I can't wait!

In email from HHS:

[click picture to embiggen]

And because I'm a giver, here's the link to register. Have fun, and try not to trash the place, m'kay?

Another 1,000 Words on ObamaCare

Buckeye Medicaid Dumping

Glancing into his crystal ball in 2009, co-blogger Mike had some harsh words for the folks running Medicaid:

"Why has Medicaid failed to protect the poor? Medicaid is the government program expressly established to provide adequate medical insurance for the poor. Why is it not doing so? Why has our government left so many of the poor without access to medical insurance?"

Flash forward 5 years or so, and we find that not much has changed:

"Medicaid could dump 500,000 Ohioans in 6 months ... All are poised to lose benefits for failing to submit information needed to confirm that their household income falls within Medicaid eligibility guidelines."

And of course, this redounds negatively on Gov Kasich's (foolish) decision to expand the program, multiplying the effects.

So what's the problem?

There are several, actually:

First, all of these folks are required to "re qualify" annually; that is, to prove that their economic woes haven't let up. That they failed to do so is, ultimately, on them. But the state, having initially approved them does have an obligation to remind them of this requirement. The traditional method is via snail mail, but some of these "Some problems ... may have been caused by apartment numbers being placed above recipient’s names on envelopes, preventing them from being delivered."

Oops.

And the notices, written (as is appropriate) in English, went to at least some folks who "speak other languages." I would say that's their problem, not the taxpayers'. And up to a third of the notices were returned as "undeliverable."

Lovely.

Talk about burying the lede, though:

"About 2.9 million poor Ohioans receive Medicaid."

Given that the state is home to just shy of 12 million people, has it occurred to someone in charge that having 25% of your population on Medicaid might indicate just a wee little problem?

Way to go, Guv.

[Hat Tip: Co-blogger Bob V]

Anthem Hacking - Perspective

In comments to one of our previous posts on this topic, Co-Blogger Bob makes a terrific point:

"Not taking anything away from Mandiant as they are the "A team" when it comes to tracking down hackers ... Most companies do very little when it comes to cybersecurity and many (mo st?) have probably been hacked and just don't know it."

This morning, the Wall Street Journal reported that "Anthem Inc. stored the Social Security numbers of 80 million customers without encrypting them." On the face of it, this seems pretty unconscionable.

But is it?

I reached out to several of our carriers, and to AHIP (America’s Health Insurance Plans), which represents (most of) the carriers. I had but one question:

"Is this an egregiously unusual oversight, or industry standard?"

That is, is Anthem an outlier here, or do most carriers leave that kind of information unencrypted? The folks at AHIP were kind enough to send me a copy of the HHS regs on the subject, but also told me that they'd not surveyed their members on it, so can't tell me whether or not this is SOP.

I'm still waiting to hear back from my carriers, and will update this post as appropriate.

JUST IN from Anthem:

Members who may have been impacted by the cyber attack against us should be aware of scam email campaigns targeting current and former members.  These scams, designed to capture personal information (known as “phishing”) are designed to appear as if they are from a health plan and the emails include a “click here” link for credit monitoring. These emails are NOT from us.

• DO NOT click on any links in email.
• DO NOT reply to the email or reach out to the senders in any way.
• DO NOT supply any information on the website that may open, if you clicked on a link in email.
• DO NOT open any attachments that arrive with email.

We are not calling members regarding the cyber attack and are not asking for credit card information or social security numbers over the phone.

Friday LinkFest

So, several items that, while blogworthy, don't seem to merit their own dedicated post:

■ As we've already seen, the future of health care CO-OPs is, at best, rocky. At the Employee Benefit Advisor, Bruce Shutan looks under the hood, and notes that "it captured nearly a quarter of the total enrollment for all 23 consumer-operated and oriented plans known as CO-OPs operating in 24 states," all on a "shoe-string" budget. Bruce has some thoughts on how this will play out as we go forward..

■ FoIB Holly R tips us to this tidbit of tantalizing info:

"The White House cyber czar may have had personal information leaked in the recent Anthem data breach."

That breach, news of which is still evolving, may end up "touching" a lot more folks than originally believed.

■ As we've noted many times, wine (especially the reds) have been linked to several positive health effects. Turns out, that IPA you were drinking last Sunday may also help:

"[B]eer also confers some health benefits, according to a new study, which found a compound within can ward off dementia and other cognitive decline."

L'chaim!

Anthem Hacked [UPDATED]

Picking up on where Bob left off ...

As you've no doubt already heard, hackers were able to gain access to Anthem's systems, and access the personal information of both clients and employees (it's not clear whether "employees" include independent agents/brokers who represent the carrier). All told, it appears that over 80 million folks were affected.

To its credit, Anthem sent out an email last night addressing the problem:

To our valued business partner:

Safeguarding your clients’ personal, financial and medical information is one of our top priorities, and because of that, we have state-of-the-art information security systems to protect your data. However, despite our efforts, Anthem was the target of a very sophisticated external, cyber attack. These attackers gained unauthorized access to Anthem’s information technology (IT) system and have obtained personal information from our current and former members such as their names, birthdays, member ID/Social Security numbers, street addresses, email addresses and employment information, including income data. Based on the information we know now, there is no evidence that banking, credit card, medical information (such as claims, test results, or diagnostic codes) were targeted or compromised.

Once the attack was discovered, Anthem immediately made every effort to close the security vulnerability, contacted the Federal Bureau of Investigation (FBI) and began fully cooperating with their investigation. Anthem has also retained Mandiant, one of the world’s leading cybersecurity firms, to evaluate our systems and identify solutions based on the evolving landscape. [ed: emphasis added, see below]

Anthem’s own associates’ personal information was accessed during this security breach. We join you in your concern and frustration, and we assure you that we are working around the clock to do everything we can to further secure your clients' data.

Anthem will individually notify current and former members whose information has been accessed. We will provide credit monitoring and identity protection services free of charge so that those who have been affected can have peace of mind. We have created a dedicated website (www.AnthemFacts.com) where members can access information such as frequently asked questions and answers. We have also established a dedicated toll-free number that both current and former members can call if they have questions related to this incident. That number is: 1-877-263-7995. As we learn more, we will continually update this website and share that information with you.

We want to personally apologize to you and your clients for what has happened, as we know you expect us to protect your information. We will do everything in our power to make our systems and security processes better and more secure, and hope that we can earn back your trust.

Sincerely,

Ken Goulet
President, Commercial and Specialty Business

Erin Hoeflinger
Ohio Plan President
 
Regarding Mandiant and cyber-remediation: on the one hand, this seems very much like closing the barn door. On the other, at least they recognize their vulnerability, and are seeking to mitigate and minimize it. One suspects that Mandiant (and its competitors) will be very busy going forward, as other insurers take stock of their own potential weak spots.

UPDATE: FoIB Holly R catches this from Bloomberg:

"... hackers obtained data on tens of millions of current and former customers and employees"

And asks: "How former?"

Good question, disturbing implications.

Taxes, Shmaxes

Thanks to Moe Lane, we have this little gem:

"Consumers who received too much in federal tax credits ... got a reprieve of sorts from the Internal Revenue Service this week. Although they still have to repay ... excess subsidies, the IRS won’t ding them with a late payment penalty if they don’t repay it by the April 15 tax deadline."

Which is nice for them, but creates a problem:

"The Equal Protection Clause of the 14th amendment of the U.S. Constitution prohibits states from denying any person within its jurisdiction the equal protection of the laws."

So what's the problem?

Well, suppose you owe taxes on something (other than the subsidy clawback), and fail to pay on time: you're still subject to fines and interest. But for the special snowflakes that "miscalculated" their subsidies, well, no worries, mate.

Of course, it's not really a problem at all, at least according to the Obamastration:

"White House Press Secretary Josh Earnest described reports that millions of Americans would be getting tax bill because of Obamacare as "inaccurate" just days after the Treasury Department estimated that 6 million Americans will pay about $2 billion in individual mandate taxes this year."

Left hand meet right hand.

Sheesh.

Guest Post: The Force(d) is with You

From time to time, we host guest posts from esteemed colleagues and other bloggers. These are typically for insurance-related matters that fall outside our own particular wheelhouse. Today, we're pleased to bring you this post from Dennis Wall,  an elected member of the American Law Institute, author of several legal and risk-related books, and proprietor of the Insurance Claims And Issues blog.

If you've ever bought a house, you know that the lender requires you to insure it. Sometimes, folks let their coverage lapse, and the lender then obtains its own coverage, "forcing" it onto the property (and the homeowner). Today, Dennis explains the implications in this economy:

The “Great Recession” of 2008-2009 has caused a lot of harm. No harm has been felt more keenly than by people involved with residential mortgages and home loans.

During the six years leading up to the Great Recession, or from 2002-2007, mortgage debt rose nearly as much as it had since the United States was founded. Household mortgage debt rose an average of $60,000.00 during those same six years, or about $10,000.00 each year for each home in the United States. That is also the time when the once-standard 30-year fixed rate mortgage with a 20% down payment was no longer the mortgage loan of choice. [Findings from report of the Financial Crisis Inquiry Commission. THE FINANCIAL CRISIS INQUIRY COMMISSION FINAL REPORT, January, 2011].

A forensic investigation over three years, including research into publicly available federal court electronic filings, reveals clearly that many business practices have deliberately been kept secret concerning the sale, maintenance and monitoring of mortgages. In particular, the practices of a small number of insurance companies offering force-placed insurance to lenders has dramatically driven up the price of lender force-placed insurance or LFPI.

LFPI is insurance which protects the lender’s interest in the borrower’s collateral. It is “collateral protection insurance” in the sense that it is insurance which protects only the collateral.

Kickbacks and other alleged premium add-ons drive up the price of lender force-placed insurance. Some call the process “reverse competition” or “pay to play.” LFPI premiums are paid by the borrowers and not by the lenders. That is, the premiums for LFPI are paid by homeowners and not by the banks. A three-year review of federal court files reveals that the only complaints which survive in court are the complaints in which the homeowners complain about the extra charges added on to the monthly premiums they pay.

The notion that lenders force-place insurance only when borrowers do not meet their obligations, is largely a myth. It is far more likely that lenders will force-place insurance and let the homeowners oppose it if the homeowners can. To the contrary, homeowners make their monthly mortgage payments for the most part – until they no longer can make the payments including the added burden of premiums for “pay to play” force-placed insurance. Then the lenders and their agents foreclose, and the mortgage machine starts all over again.

Thanks, Dennis! And look for his new book, “Lender Force-Placed Insurance,” due out this Spring.