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Last summer, the Trump administration, physician advocates, public health academics and activists requested a voluntary commitment from commercial health insurance industry CEOs to streamline the prior authorization process. Commercial health insurance companies like UnitedHealthcare, Cigna, Aetna, CVS Health, Humana and others signed onto a six-part voluntary pledge, understanding they would be required to reach a number of benchmarks to reduce prior authorization, which is when a commercial health insurance company does not allow the medical treatment requested for a patient by a physician without permission from the insurer.

The problem with the singular fight to reduce prior authorizations? Prior authorization is but one of countless denial of care tools commercial health insurance companies use to deploy what’s known as the float.

This is how the denial of care business model works: The commercial health insurance float is the cash a company holds onto during the time gap between collecting premium payments from customers, denying medical care and actually paying out medical claims to healthcare providers. Insurers are highly motivated to artificially widen the gap between receiving a premium and paying a doctor. The industry uses an arsenal of chaotic administrative barriers and lengthy review processes to slow down reimbursements while patients in need wait for medical care. On a hospital’s balance sheet, this delayed money sits as accounts receivable, but on the commercial insurer’s balance sheet, it remains part of the float while generating millions of dollars in interest before it is paid out — if ever. The delay allows commercial health insurance companies to invest this cash — frequently into securities, bonds, real estate, private equity and other investments — and increase profits, while patients struggle and suffer.

In addition to prior authorization, here are just a handful of the many denial of care tools used by the industry:

“Click and close” requires medical directors to maintain rapid medical care case-review quotas. Their bonuses and performance metrics are often tied to the volume of cases closed and speedy boilerplate denials.

Step therapy, also called “fail first” by the industry, requires patients to try cheaper, less effective treatments instead of implementing what a physician recommends. Insurers deny the doctor’s prescribed treatment until the patient officially documents that the cheaper options failed to work.

“Procedure to diagnosis,” also known as PxDx is software that allows companies to instantly batch-reject medical claims. If the submitted procedure code matches an approved diagnosis code on the insurer’s list, the doctor is paid automatically. If the codes do not align, the claim is automatically rejected, often processing in as little as 1.2 seconds. For reference, over a period of two months in 2022, Cigna doctors employed by the company to review insurance claims denied more than 300,000 requests for payments using PxDx.

Commercial health insurance companies also use “ghost networks,” which are inaccurate healthcare provider directories that create a false impression of comprehensive coverage by listing doctors, therapists or clinics as “in-network” when they are actually unreachable, retired, no longer accepting that insurance or closed to new patients. This deception leaves patients stranded with unexpected out-of-pocket costs and delayed treatments. Ghost networks are exceptionally prevalent in behavioral health and therapy directories.

Using AI to deny medical care is nothing new: The nH Predict algorithm was developed by SeniorMetrix in the late 1990s and early 2000s and is now owned by UnitedHealth Group. The industry calls it a “predictive” AI model, meaning it estimates how long a patient “should” need for acute nursing home or rehabilitation care. Lawsuits allege the tool has prematurely cut off medical care to elderly persons based on the algorithmic target required to increase profits.

While the float is a major financial driver across all insurance sectors, the commercial health insurance float is singular as the product/service is human health and human life.

On May 30, 1996, my dear friend and colleague Dr. Linda Peeno pointed this difference out as the first physician to testify before members of the United States Congress about the astonishing velocity of preventable harm and death caused by the float. She testified two more times after that appearance in 1996 and has been writing about denial of care ever since.

What else has accelerated over the intervening decades? The scope and scale of corporate malfeasance.

On May 29, the Attorney General of Massachusetts filed a lawsuit against Minnesota-based UnitedHealthcare for allegedly defrauding Medicare to the tune of $100 million by classifying patients as much sicker than they actually were. Nurses blew the whistle.

On June 1, the Attorney General of Arizona filed a lawsuit against UnitedHealthcare, MultiPlan, Aetna, Cigna, Humana, Elevance, Molina, Centene and Health Care Service Corporation for allegedly building and operating a system that slashed payments to doctors and hospitals and left Arizonans having to pay more for out-of-network care. As physicians who spoke during the Arizona Attorney General’s press conference stated, these are not victimless crimes.

Minnesotans, and all Americans, might consider that those who invest in commercial health insurance companies are generating wealth extracted from delayed medical care as well as untreated illness, injury, disability and preventable death.

The good news? Lawmakers are trying to slay the hydra. After learning from the Pennsylvania Insurance Department that individual market-qualified health plans denied more than 3 million claims in the state in 2024, two lawmakers introduced legislation to add a category of aggravated assault that would apply to CEOs of commercial health insurance companies if a covered person is caused serious bodily injury or dies as the result of denial of care. Citizens can replicate this legislation in state legislatures nationwide.

Slaying the denial of care hydra is not easy, but there are viable solutions in our midst. Americans can pass National Improved Medicare for All/Single Payer Universal Healthcare (Senate Bill 1506 and House Resolution 3069) and they can amend the Constitution of the United States to include healthcare as a human right.

In the meantime, as executives at UnitedHealthcare and their industry allies have tossed out yet another rodeo clown public relations spectacle — voluntarily pledging to reduce prior-authorizations — they continue to deploy an arsenal of other denial of care administrative weapons that obstruct medical care for profit.

Courtesy of Minnesota Reformer

The post Health insurers use a whole arsenal of tools to deny care, increase profit appeared first on Insurance News | InsuranceNewsNet.

Health insurers are raising rates for plans sold through Covered California by an average of nearly 10% for the second consecutive year, compounding the loss of federal subsidies that sent customer payments soaring as marketplace enrollment fell by about 170,000 people.

Rates for plans sold through Covered California, the state’s health insurance marketplace under the Affordable Care Act, commonly known as Obamacare, will rise an average of 9.9% in 2027, officials said Monday. That follows a 10.1% average increase that took effect Jan. 1, 2026. The back-to-back increases are the steepest seen in the state marketplace in nearly a decade and will likely coincide with rising costs for other forms of health insurance.

Of the nearly 10% increase in Covered California rates next year, about 8 percentage points can be traced to rising healthcare spending and 2 percentage points to federal policy changes, according to Covered California officials.

Hospitals, doctors and prescription drugs are all becoming more expensive, according to experts, state officials and insurers. The expiration of $2.5 billion in annual federal assistance for Covered California customers is also putting pressure on the market, insurers say, as healthier customers drop coverage and leave companies with a smaller pool of people who are sicker and costlier to insure.

The actual increases seen by health plan buyers in 2027 will vary depending on their plan and income. Low-income and some middle-income Californians can still qualify for government subsidies that reduce their costs.

Although underlying rates rose about 10% in 2026, customers’ monthly payments nearly doubled on average after the federal assistance expired. Covered California will send letters in October informing buyers about their prices and options ahead of the open enrollment period that begins in November.

About 1.8 million Californians buy health insurance through Covered California. They include people who earn too much to qualify for Medi-Cal, are too young for Medicare or lack affordable coverage through an employer, including gig workers and people who are self-employed.

About 10% of those customers will bear the full brunt of the price increases because they earn more than 400% of the federal poverty level and do not qualify for federal or state subsidies, Covered California Executive Director Jessica Altman said. For a single person, that threshold is about $65,000 a year.

“Those people are just being hit incredibly hard,” Altman said. “They are the only people in our healthcare system who are expected to pay the full cost of their premium with no support.”

Kaiser Permanente’s Covered California plans will rise less than the state average, increasing 6.7% in 2027. The nonprofit health giant, California’s largest private employer and private health insurer, raised its Covered California rates by 7.1% for 2026. Spokesperson Elissa Harrington said labor and prescription drug costs continue to rise as demand for care also grows.

“We have to adjust rates to cover all these rising costs, but our increases are usually lower than the average rate increases by other health plans,” she said in an email.

Anthem Blue Cross, which is a common insurance provider in Northern California, will raise its Covered California rates by an average of 13% in 2027. That follows a 14.5% increase for 2026. A spokesperson for the insurance company declined to comment.

Anthem Blue Cross is a subsidiary of Elevance Health, a publicly traded company based in Indiana.

Cynthia Cox, senior vice president at the independent analysis group KFF, said health plans are largely passing the rising cost of healthcare along to their customers at a time when U.S. health spending is increasing at a historic pace.

Health spending typically rises faster than general inflation, she said. But Cox noted a recent industry estimate that medical costs in the U.S. will jump 9% in 2027, which would be the steepest increase in 17 years. That could make employer-sponsored plans more expensive than usual next year, Cox said.

The California Association of Health Plans, which represents insurance providers, mostly blamed hospital spending for the higher rates. It also pointed to prescription drug costs, including GLP-1 medications used for weight loss and diabetes treatment that have exploded in popularity.

“California’s health plans remain steadfast in our commitment to keeping coverage as affordable as possible for California’s individuals and families,” President Charles Bacchi said in a statement.

The California Hospital Association pushed back on the insurers’ explanation.

“Insurance company complaints that ‘hospitals are spending more’ are simply wrong,” said spokesperson David Simon. “Rather, more is being spent for the hospital care that Californians need as our population is aging, sicker, and the cost to provide that care in a high-cost state like California continues to rise.”

In 2025, President Donald Trump and Republicans in Congress opted not to extend enhanced assistance for insurance buyers, including people covered through Covered California. Insurers say the expiration forced them to raise rates further because healthier people tend to drop their insurance when it becomes more expensive, leaving companies to cover a smaller pool of customers who are sicker and costlier.

The policy also dramatically increased the amount customers pay. Californians received $2.5 billion less in subsidies this year, Altman said, and their monthly premium payments rose by an average of 97%, according to marketplace data.

Covered California had projected that as many as 400,000 Californians could lose their insurance because of the federal policy. The decline so far has been smaller but still substantial.

Enrollment fell by about 170,000 people, or nearly 9%, from 1.94 million in April 2025 to 1.77 million in April 2026, Altman said.

Because experts consider Covered California plans a last resort for people who cannot get health coverage elsewhere, many of those priced out of the marketplace likely become uninsured.

California has blunted the financial burden better than some other states. A Peterson-KFF analysis of 16 states and Washington, D.C., found an average rate increase of 14% for Affordable Care Act marketplace plans next year.

To prevent more buyers from being priced out, Gov. Gavin Newsom and state lawmakers expanded state funding for subsidies this year, setting aside $300 million to help low-income insurance buyers, up from $190 million last year.

A single person earning up to $32,000 a year is eligible for assistance through the state program. Covered California estimates the funding will prevent 90,000 people from dropping their coverage next year.

But that help will not reach Californians above the subsidy cutoff, leaving them to absorb the full 2027 increase or decide whether they can still afford coverage.

The post Covered California rates to jump nearly 10% as thousands struggle to afford coverage appeared first on Insurance News | InsuranceNewsNet.

The following information was released by the Cincinnati USA Regional Chamber:

Navigating health insurance can feel complex. However, understanding your plan is essential to ensure you and your employees receive the best possible coverage without compromising quality. This is why transparency in health insurance is crucial. It provides your small business with a clearer picture of how to navigate and optimize your options.

Understanding your plan’s full scope helps you make more informed decisions.

Why do you need transparency?

If health insurance is difficult to understand, it can make the process of selecting a plan that meets the needs of your team members even more complicated. The goal of health insurance is to support everyone’s unique needs by providing plans that are valuable, flexible and simple to navigate. When employees have access to clear, comprehensive information to help them make informed, cost-effective decisions, it fosters a sense of trust and loyalty, giving them more incentive to stay.

Where transparency counts

Transparency in health insurance can be exemplified in several areas:

Understanding health insurance costs: Deciphering key insurance terms like premium, deductible and copay benefits your employees’ health and their wallet. For example, an employee might be confused why they need to pay out-of-pocket costs after they’ve already met their deductible. When employees understand how these factors impact their overall expenses, they can better anticipate financial responsibilities and make informed decisions about their healthcare.

Comparing network structures: Health insurance plans vary in network sizes. Helping employees understand whether they can visit their preferred doctors, the associated costs and out-of-network coverage ensures they’re well-informed so they can select the best option. Knowing a Health Maintenance Organization (HMO) is cheaper but restricts coverage to in-network providers while a Preferred Provider Organization (PPO) offers more flexibility and fewer restrictions on non-network providers aids your employees in choosing a plan that fits their needs. Each plan has its advantages, and one may work better than another for you, your business and team members.

Advantages of tax-exempt offerings: Additional benefits can be integrated into your employees’ health plan to help them save money and provide tax benefits for your small business. Depending on the insurance plan, employees might be eligible for a Flexible Spending Account (FSA) or a Health Savings Account (HSA). An FSA allows employees to make pre-tax contributions for eligible healthcare expenses and you, the owner, can save up to nearly 8% in combined FICA and other federal taxes for every contributed dollar. An HSA pairs with a high-deductible health plan (HDHP), is employee-owned and allows them to make the same pre-tax contributions that roll over from year to year with no limit, giving them the ability for long-term healthcare savings.

Implementing wellness programs: Healthier employees lead to lower healthcare costs, for them and your business. Helping your employees lead a healthy lifestyle through a workplace wellness program not only lowers certain risk factors but also reduces absenteeism and promotes a positive work environment that gives them more incentive to stay.

Prescription cost coverage: Every employee has different health needs. Some may have chronic conditions that drive up their healthcare costs. Knowing they have access to budget-friendly prescription drug benefits can help alleviate this hardship. Check if your health plan coverage includes access to benefits like Express Scripts, a pharmacy benefit manager (PBM) that helps employees order refills, locate participating pharmacies and save time and money with home delivery.

Local health coverage you can rely on

Medical Mutual offers the ChamberHealth program in partnership with the Cincinnati Chamber to help your business find the right health plan tailored to your unique needs. If you’re a business owner looking for a range of health plan options, including self-funded multiple employer welfare arrangement (MEWA) plans, along with ancillary benefits like dental, vision, and life and disability coverage, consider enrolling in ChamberHealth today.

The post TRANSPARENCY IN YOUR HEALTH INSURANCE PLAN appeared first on Insurance News | InsuranceNewsNet.

The following information was released by the Pennsylvania Democratic Party:

Pennsylvanians in Bucks and Montgomery counties are continuing the feel the pain of Fitzpatrick’s essential vote to advance Republicans’ devastating healthcare cuts

PENNSYLVANIA Brian Fitzpatrick cast the essential vote to advance Republicans’ devastating healthcare cuts, and his constituents in Bucks and Montgomery counties are already feeling the pain.

New data shows that more than 11,100 of Fitzpatrick’s constituents have already been forced to drop their coverage as Pennsylvanians across Bucks and Montgomery counties have seen their health insurance premiums rise by an average of 64.5%.

While Governor Shapiro and Pennsylvania Democrats are standing up to protect Pennsylvanians’ healthcare and make life more affordable, Fitzpatrick and his fellow Pennsylvania Republicans continue putting their loyalty to a toxic, cost-raising agenda first and that’s exactly why Pennsylvanians across Bucks and Montgomery counties will reject Fitzpatrick and elect Bob Harvie this November.

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The post NEW DATA: BRIAN FITZPATRICK-BACKED HEALTHCARE CUTS CAUSE MORE THAN 11,100 PENNSYLVANIANS IN BUCKS, MONTCO TO DROP INSURANCE COVERAGE appeared first on Insurance News | InsuranceNewsNet.

The following information was released by the Pennsylvania Democratic Party:

Pennsylvanians are seeing the devastating impact of Garrity’s agenda and know she cannot be trusted to stand up for our healthcare

PENNSYLVANIA The number of Pennsylvanians who have been forced to drop their health insurance due to Donald Trump and MAGA Republicans’ healthcare cuts surpassed 177,000 this month, and even as more and more Pennsylvanians have been forced to make impossible decisions “between health coverage and rent, food and utilities,” Garrity is still all in on her “support for federal policies raising healthcare costs.”

“Stacy Garrity is a MAGA loyalist who said Trump’s healthcare cuts were ‘absolutely the right thing to do’ even as Pennsylvanians continue to lose their health insurance,” said Ava Pitruzzello, spokesperson for the Pennsylvania Democratic Party. “Garrity will always be a rubber stamp for Trump’s failed agenda that has only made life harder and more expensive, and she will never stand up for our Commonwealth.”

Here’s the timeline of Garrity’s support for higher healthcare premiums as Pennsylvanians were forced to drop their insurance:

When Trump and congressional Republicans chose not to extend the ACA tax credits at the end of 2025, Garrity said that it was “absolutely the right thing to do” and she had “100% confidence” that Republicans were “going down the right path” despite multiple reports that insurance premiums were set to more than double in the new year.

After Pennie announced that 85,000 Pennsylvanians nearly 1 in 5 enrollees dropped their health insurance during the open enrollment period due to premiums doubling thanks to legislation Garrity endorsed, Garrity doubled down in a TV interview on her support for the cruel Washington policies that caused healthcare costs to skyrocket.

As the number of Pennsylvanians being forced to drop their insurance jumps up every month since open enrollment ended from 130,000 in April to more than 160,000 in the first week of June to now more than 177,000 in July Garrity has been called out for “not hav[ing] the courage to stand up for Pennsylvanians” facing rising healthcare costs as Garrity proves she will always put her loyalty to Trump’s disastrous agenda over standing up for the Commonwealth.

The post STACY GARRITY SUPPORTS SKYROCKETING HEALTHCARE COSTS AND 177,000 PENNSYLVANIANS LOSING THEIR HEALTHCARE appeared first on Insurance News | InsuranceNewsNet.

South Floridians enrolled in certain Medicare Advantage plans could soon find themselves locked out of in-network care with the University of Miami Health System.

UHealth patients insured through a Medicare Advantage plan that is part of Florida’s Preferred Care Network, a UnitedHealthcare-owned company, are on notice: If UHealth and United don’t make a new contract soon, their primary and specialty doctors at UHealth could be out-of-network with the insurer as early as September.

Patients with Medicare Advantage plans through the Preferred Care Network have told the Miami Herald they’ve begun to receive letters from United warning them about the potential coverage change.

United, the largest health insurer in the nation, confirmed to the Herald this week that the warning comes as it continues to negotiate “in good faith” to try and strike a deal with the private health system. And the deadline to make a deal is nearing, both for Preferred Care Network members and for members enrolled in commercial and Medicaid plans.

The heated negotiations are over reimbursement rates. UHealth is accusing United of not paying it enough for care. United is accusing UHealth of wanting too much money. It’s similar to the still ongoing and stalled contract disputes between Broward’s public health systems and Florida Blue, one of the largest insurers in the state.

Here are the key things to know.

If UHealth and United don’t make a deal, the hospital system — including the renowned Sylvester Comprehensive Cancer Center and Bascom Palmer Eye Institute — would be out-of-network within the next two months for thousands of people across South Florida enrolled in United-managed plans.

If a deal is not made, members insured through United’s Preferred Care Network Medicare Advantage plans would be out-of-network with UHealth starting Sept. 1. UHealth is already out-of-network for all other United Healthcare Medicare Advantage plans.

For all other United members, if no agreement is reached, UHealth would be out-of-network even earlier, starting Aug. 1. That includes people with employer-sponsored commercial plans, Medicaid (UnitedHealthcare Community Plan of Florida) and Individual Family Plans, which are health insurance plans a person purchases on their own, usually through the Affordable Care Act marketplace.

UnitedHealthcare says it has a “large network of providers” across South Florida, including Baptist Health Medical Group, HCA Florida Mercy Hospital, Nicklaus Children’s Hospital and Mount Sinai Medical Center.

South Florida’s three public hospital systems — Jackson Health System in Miami-Dade County and Broward Health and Memorial Healthcare System in Broward County — all accept some United health insurance plans, according to their websites.

The fastest way to find a doctor near you is to use United’s online doctor search. Patients should always call to double-check that the provider will accept your insurance.

United’s Preferred Care Network Medicare Advantage plans provide health maintenance organization (HMO) plans with prescription drug coverage across Miami-Dade and Broward counties. Some plans may also offer additional benefits, including vision, dental, rides to appointments, over-the-counter medications and a fitness program.

Over 41,000 people across Miami-Dade and Broward counties are enrolled in plans through Preferred Care Network, according to the National Committee for Quality Assurance (NCQA), an organization that measures and accredits health plans.

Patients with HMO plans are required to choose a primary care provider as their main doctor and must get care with doctors and other providers who are in the plan’s network and service area. United Healthcare describes HMO plans as an insurance that usually offers lower premiums, deductibles and cost-shares. However, there’s also no out-of-network coverage with an HMO plan.

“If you get care from any out-of-network provider (like a doctor, surgeon or lab for bloodwork), you’ll be required to pay the full cost of that service,” reads United Healthcare’s website. “The only time an HMO plan will cover out-of-network services is if it’s emergency care.”

READ MORE: Should you get original Medicare or an Advantage plan? Here’s what to know

If no deal is made, people with the aforementioned health insurance plans through United will no longer be able to get in-network care with UHealth doctors and other providers across UHealth’s South Florida facilities. That means you’ll either have to change doctors or pay out-of-pocket for treatment. And that can be costly.

It’s worth noting that if UHealth were to go out-of-network, patients who are undergoing treatment for serious or complex conditions, such as people who are pregnant or undergoing active cancer treatment, would be eligible to continue receiving in-network care with UHealth for 90 days due to a federal law that requires insurers to provide continuity of care.

“UnitedHealthcare members must apply and be approved for continuity of care. People can apply at any time from now through 30 days after a provider has left our network,” UnitedHealthcare wrote on a webpage about the ongoing negotiations. “They should call the number on their health plan ID card if they need assistance or have questions.”

The good news is that UnitedHealthcare, like most health insurers, is required by law to cover emergency care at UHealth and other ERs at in-network rates, even if the emergency room is out-of-network.

It doesn’t matter if the patient is hospitalized or goes home the same day. If it’s an emergency, health insurance will cover it at in-network rates, according to Patricia Kelmar, senior director of healthcare campaigns at PIRG, a nonprofit that advocates for consumer protections, public health and environmental sustainability.

But beware: ER doctors decide the necessary treatment, but it’s the health insurer that ultimately determines whether the provided services fall under emergency care for in-network rates, Kelmar previously told the Herald.

TIP: ERs are meant for life-threatening or potentially life-threatening symptoms and conditions, such as if you’re struggling to breathe or have chest pain or numbness on one side of the body. Urgent care is the place to start for everything else, like a cough, sore throat, runny nose or diarrhea. Urgent care visits are also cheaper.

©2026 Miami Herald. Visit miamiherald.com. Distributed by Tribune Content Agency, LLC.

The post People with this Medicare plan could soon go out-of-network at UHealth hospitals appeared first on Insurance News | InsuranceNewsNet.

First-time homeowners in Texas are falling behind on their mortgages at increasing rates, largely due to rising home insurance costs.

That’s according to data from the Federal Housing Administration, which insures mortgages issued by private lenders. Most borrowers who get FHA loans are first-time homebuyers and typically have lower credit and less money saved for a down payment.

That makes them more vulnerable to rising monthly costs, said Erin Dee, the chief operating officer of Interlinc Mortgage Services, a lender based in Houston.

Roughly 6% of FHA loans in Texas were seriously delinquent in April, meaning they were at least 90 days past due, up from 3.7% a year earlier.

Scott Norman, the CEO of the Texas Mortgage Bankers Association, called that rise “concerning.”

Both Dee and Norman said the primary driver of increased delinquencies on FHA loans was the rising cost of home insurance.

Home insurance rates have increased on average 80% since 2020, according to the Texas Department of Insurance. In some areas of the state, premiums have doubled from one year to the next.

Those increased costs show up in borrowers’ monthly escrow payments, which mortgage lenders collect to cover property taxes and home insurance. Typically, lenders estimate annual premiums and charge borrowers monthly to cover the cost.

But if insurance costs jump suddenly — as they have since 2022 — banks cover the difference initially and then pass the cost along to borrowers the following year, in addition to the increased premium. “It is almost like a double hit,” Dee said.

Compounding the problem is that homeowners with low credit — those most likely to get FHA loans — already pay more for home insurance than people in similar homes with good credit.

A report last year from the Consumer Federation of America and the Climate and Community Institute found that Texans with low credit are paying almost $3,000 more for home insurance on average each year than those with high scores.

The report found that a homeowner with good credit living in a high-disaster risk area will pay less than a homeowner with poor credit living in a low-risk area.

To qualify for a FHA loan, a borrower only needs a 500 FICO score.

Judson Robinson, the president and CEO of the Houston Area Urban League, said many first-time homebuyers don’t fully understand that even with a fixed-rate mortgage, their monthly payment could change.

“They just know that when they finally were able to get their home acquired, that it was the note plus your insurance and your taxes …. [but] knowing that a couple of these things are adjustable based upon economic conditions is foreign to a lot of folks.”

Robinson said the nonprofit has seen a 20% increase in calls over the last year of people in some kind of housing distress.

High delinquency rates haven’t yet translated into a spike in foreclosures, Norman said, although filings are up in almost every state, including Texas.

The FHA data isn’t broken down geographically within the state.

Dee said she was most concerned about recent homebuyers — those who closed in 2022 and 2023 — who haven’t earned enough equity to sell, particularly as values have stabilized or in some cases decreased since the peak of the pandemic.

Late payments on conventional mortgages have remained flat, with less than 1% of borrowers in serious delinquency.

The post Mortgage delinquencies up among first-time homeowners appeared first on Insurance News | InsuranceNewsNet.

First-time homeowners in Texas are falling behind on their mortgages at increasing rates, largely due to rising home insurance costs.

That’s according to data from the Federal Housing Administration, which insures mortgages issued by private lenders. Most borrowers who get FHA loans are first-time homebuyers and typically have lower credit and less money saved for a down payment.

That makes them more vulnerable to rising monthly costs, said Erin Dee, the chief operating officer of Interlinc Mortgage Services, a lender based in Houston.

Roughly 6% of FHA loans in Texas were seriously delinquent in April, meaning they were at least 90 days past due, up from 3.7% a year earlier.

Scott Norman, the CEO of the Texas Mortgage Bankers Association, called that rise “concerning.”

“This unfortunately positions Texas at the epicenter of the national affordability squeeze,” he told state lawmakers at a hearing in June.

Both Dee and Norman said the primary driver of increased delinquencies on FHA loans was the rising cost of home insurance.

Home insurance rates have increased on average 80% since 2020, according to the Texas Department of Insurance. In some areas of the state, premiums have doubled from one year to the next.

Those increased costs show up in borrowers’ monthly escrow payments, which mortgage lenders collect to cover property taxes and home insurance. Typically, lenders estimate annual premiums and charge borrowers monthly to cover the cost.

But if insurance costs jump suddenly — as they have since 2022 — banks cover the difference initially and then pass the cost along to borrowers the following year, in addition to the increased premium. “It is almost like a double hit,” Dee said.

Compounding the problem is that homeowners with low credit — those most likely to get FHA loans — already pay more for home insurance than people in similar homes with good credit.

A report last year from the Consumer Federation of America and the Climate and Community Institute found that Texans with low credit are paying almost $3,000 more for home insurance on average each year than those with high scores.

The report found that a homeowner with good credit living in a high-disaster risk area will pay less than a homeowner with poor credit living in a low-risk area.

To qualify for a FHA loan, a borrower only needs a 500 FICO score.

Judson Robinson, the president and CEO of the Houston Area Urban League, said many first-time homebuyers don’t fully understand that even with a fixed-rate mortgage, their monthly payment could change.

High delinquency rates haven’t yet translated into a spike in foreclosures, Norman said, although filings are up in almost every state, including Texas.

The FHA data isn’t broken down geographically within the state.

Late payments on conventional mortgages have remained flat, with less than 1% of borrowers in serious delinquency.

The post Data: Mortgage delinquencies up among first-time homeowners appeared first on Insurance News | InsuranceNewsNet.

First-time homeowners in Texas are falling behind on their mortgages at increasing rates, largely due to rising home insurance costs.

That’s according to data from the Federal Housing Administration, which insures mortgages issued by private lenders. Most borrowers who get FHA loans are first-time homebuyers and typically have lower credit and less money saved for a down payment.

That makes them more vulnerable to rising monthly costs, said Erin Dee, the chief operating officer of Interlinc Mortgage Services, a lender based in Houston.

Roughly 6% of FHA loans in Texas were seriously delinquent in April, meaning they were at least 90 days past due, up from 3.7% a year earlier.

Scott Norman, the CEO of the Texas Mortgage Bankers Association, called that rise “concerning.”

Both Dee and Norman said the primary driver of increased delinquencies on FHA loans was the rising cost of home insurance.

Home insurance rates have increased on average 80% since 2020, according to the Texas Department of Insurance. In some areas of the state, premiums have doubled from one year to the next.

Those increased costs show up in borrowers’ monthly escrow payments, which mortgage lenders collect to cover property taxes and home insurance. Typically, lenders estimate annual premiums and charge borrowers monthly to cover the cost.

But if insurance costs jump suddenly — as they have since 2022 — banks cover the difference initially and then pass the cost along to borrowers the following year, in addition to the increased premium. “It is almost like a double hit,” Dee said.

Compounding the problem is that homeowners with low credit — those most likely to get FHA loans — already pay more for home insurance than people in similar homes with good credit.

A report last year from the Consumer Federation of America and the Climate and Community Institute found that Texans with low credit are paying almost $3,000 more for home insurance on average each year than those with high scores.

The report found that a homeowner with good credit living in a high-disaster risk area will pay less than a homeowner with poor credit living in a low-risk area.

To qualify for a FHA loan, a borrower only needs a 500 FICO score.

Judson Robinson, the president and CEO of the Houston Area Urban League, said many first-time homebuyers don’t fully understand that even with a fixed-rate mortgage, their monthly payment could change.

“They just know that when they finally were able to get their home acquired, that it was the note plus your insurance and your taxes …. [but] knowing that a couple of these things are adjustable based upon economic conditions is foreign to a lot of folks.”

Robinson said the nonprofit has seen a 20% increase in calls over the last year of people in some kind of housing distress.

High delinquency rates haven’t yet translated into a spike in foreclosures, Norman said, although filings are up in almost every state, including Texas.

The FHA data isn’t broken down geographically within the state.

Dee said she was most concerned about recent homebuyers — those who closed in 2022 and 2023 — who haven’t earned enough equity to sell, particularly as values have stabilized or in some cases decreased since the peak of the pandemic.

Late payments on conventional mortgages have remained flat, with less than 1% of borrowers in serious delinquency.

The post Mortgage delinquencies up among first-time homeowners appeared first on Insurance News | InsuranceNewsNet.

First-time homeowners in Texas are falling behind on their mortgages at increasing rates, largely due to rising home insurance costs.

That’s according to data from the Federal Housing Administration, which insures mortgages issued by private lenders. Most borrowers who get FHA loans are first-time homebuyers and typically have lower credit and less money saved for a down payment.

That makes them more vulnerable to rising monthly costs, said Erin Dee, the chief operating officer of Interlinc Mortgage Services, a lender based in Houston.

Roughly 6% of FHA loans in Texas were seriously delinquent in April, meaning they were at least 90 days past due, up from 3.7% a year earlier.

Scott Norman, the CEO of the Texas Mortgage Bankers Association, called that rise “concerning.”

Both Dee and Norman said the primary driver of increased delinquencies on FHA loans was the rising cost of home insurance.

Home insurance rates have increased on average 80% since 2020, according to the Texas Department of Insurance. In some areas of the state, premiums have doubled from one year to the next.

Those increased costs show up in borrowers’ monthly escrow payments, which mortgage lenders collect to cover property taxes and home insurance. Typically, lenders estimate annual premiums and charge borrowers monthly to cover the cost.

But if insurance costs jump suddenly — as they have since 2022 — banks cover the difference initially and then pass the cost along to borrowers the following year, in addition to the increased premium. “It is almost like a double hit,” Dee said.

Compounding the problem is that homeowners with low credit — those most likely to get FHA loans — already pay more for home insurance than people in similar homes with good credit.

A report last year from the Consumer Federation of America and the Climate and Community Institute found that Texans with low credit are paying almost $3,000 more for home insurance on average each year than those with high scores.

The report found that a homeowner with good credit living in a high-disaster risk area will pay less than a homeowner with poor credit living in a low-risk area.

To qualify for a FHA loan, a borrower only needs a 500 FICO score.

Judson Robinson, the president and CEO of the Houston Area Urban League, said many first-time homebuyers don’t fully understand that even with a fixed-rate mortgage, their monthly payment could change.

“They just know that when they finally were able to get their home acquired, that it was the note plus your insurance and your taxes …. [but] knowing that a couple of these things are adjustable based upon economic conditions is foreign to a lot of folks.”

Robinson said the nonprofit has seen a 20% increase in calls over the last year of people in some kind of housing distress.

High delinquency rates haven’t yet translated into a spike in foreclosures, Norman said, although filings are up in almost every state, including Texas.

The FHA data isn’t broken down geographically within the state.

Dee said she was most concerned about recent homebuyers — those who closed in 2022 and 2023 — who haven’t earned enough equity to sell, particularly as values have stabilized or in some cases decreased since the peak of the pandemic.

Late payments on conventional mortgages have remained flat, with less than 1% of borrowers in serious delinquency.

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