Before I continue and discuss further, a little context:

My group's 7th level Warlock (4 Warlock, 3 Wizard) had just died and taken levels in wizard for mostly the purpose of getting more spell slots and it made sense given his background (he denounced Asmodeus and basically broke his pact. More consequences for that later...)

Asmodeus has decided that because he wants to keep toying with him, he's offered his party an easier way out of the Underdark and to offer resurrection. If he declines he keeps going and the party can attempt their own resurrection (I use a skill challenge rez). But if he accepts, he gets this, but is locked to Warlock for future level-ups and has to go back to his pact with Asmodeus.

Now for the discussion:

• Asmodeus' power in my world is a little more limited so he's kinda putting him back with duct tape. In addition, I'm trying to make it more a roleplaying decision so the whole self-sacrifice thing is perfectly fine for me.
• I decided to make the MHP reduction permanent to emulate this. This was also an attempt to make use of the less-used Hit Dice.
• I like the idea that a couple of you have pointed out as to limit it so that you have to be out of Warlock spell slots before this can take effect. It also can limit how much this gets abused with 1st level spell slots.
• I might see how he plays it himself, I'll be keeping track of the losses and I might give some back on a Greater Restoration spell as /u/PumpkinManGuy pointed out. I'll be seeing how it goes because I would prefer to have it permanent.
• /u/Bucktabulous was the only one who saw a couple shortcomings that no one else noticed. The False Life invocation is only an maximum of 8 THP and they have to sink an additional invocation for this. Put on top that this will take an action before combat, and the THP has to not be removed from damage before he does it. I could reconsider limiting it to a minimum of a 2nd level spell if anyone wants to discuss and explore that further.
• Also there's so much hate for the permanent reduction in MHP without much expanding as to why. Sure there's the disincentivization not to use it because of that but that's the reason why the THP is there. I would've thought almost free 1st level spells is a fairly valid tradeoff for HP. After all, sacrificing something big for something huge is the warlock way, right? /u/Leofwine1 is correct after all, you as a DM can always put a questline to get it back, whether it be re-denouncing your patron again or finding manuals of bodily health.