John Hershey is a law student at Widener Law Commonwealth and a guest contributor to this blog.
Crop insurance programs continue to be a sticking point in Farm Bill negotiations. Farmers pay federally subsidized premiums to obtain crop insurance coverage from private insurers. Crop insurance protects revenues when prices fall or natural causes such as drought or flood reduce harvests. Crop insurance programs and guidelines are reauthorized and set by the Farm Bill.
Despite providing a vital safety net for some farmers, only 15% of farmers receive 90% of all crop insurance subsidies. The FBLE has suggested reforms for crop insurance programs in the past, suggesting that “crop insurance programs should provide a safety net in bad years rather than subsidize and concentrate profits.”
The federal government paid a record $17.3 billion for crop insurance subsidies in 2022. Costs may continue rising, with the Congressional Budget Office increasing its 2024 cost projections for the next decade by 29% compared to 2023 estimates. Meanwhile, Farm Bill costs are measured against a baseline whereby, if spending increases over the baseline, cuts or reforms may be required for other programs. Since some congressional leaders prefer a budget-neutral Farm Bill, reforms may be needed to fund other priorities.
Recently, the nonpartisan U.S. Government Accountability Office (GAO) offered two solutions for reducing crop insurance program costs: reducing compensation for private insurers and means-testing subsidies (farmers currently receive crop insurance subsidies regardless of their income). Private insurance companies requested $3.8 billion in reimbursements to cover administrative expenses out of $17.3 billion in program costs in 2022, and the GAO expects administrative costs to increase over the next decade if Congress makes no changes. The GAO also estimates that if Congress reduces subsidies to high-income policy holders by 15%, the federal government could save around $15 million in program expenses.
Some members of Congress have taken note of the GAO report and point to projected program increases as a cause for concern and an opportunity to reduce government “waste.” Congressman Earl Blumenauer (D-OR) and Congressman Ralph Norman (R-SC) introduced a bill to require more transparency surrounding who receives payments and which private insurance companies benefit from payments to farmers, while Blumenauer introduced a separate bill to cap insurance premiums received by high-income farmers.
The GAO report was not well-received by all members of Congress: U.S. House Committee on Agriculture Chairman Glenn “GT” Thompson (R-PA), one of the lead drafters and negotiators of the Farm Bill, said that the GAO report was not “worth the paper it is printed on.” Chairman Thompson’s criticisms of the report included that farmers appreciate the current crop insurance system because the current public-private model is reliable, that they are already paying premiums to receive this coverage, and that they rely on this promise of indemnification when making financial and business decisions.
Meanwhile, a group of Democratic senators has introduced a bill to expand crop insurance to cover more crops and smaller farms. The senators introduced this bill to diversify the types of covered crops and to ensure smaller producers can receive coverage. Implicit in this bill introduction is the idea that lawmakers like crop insurance generally, and some would like to see it expanded. Many of the senators said that they would continue to support existing programs if Congress enacts this expansion.
The way forward for crop insurance programs in the Farm Bill is beset by a number of competing priorities: fiscal hawks would like to restrict programs and add transparency, others prefer the status quo with existing coverage, while still others want to see programs expanded to cover more crops and smaller farms. This debate will be an interesting one to watch as negotiations continue.
The views and opinions expressed on the FBLE Blog are those of the authors and do not necessarily reflect the official policy or position of FBLE. While we review posts for accuracy, we cannot guarantee the reliability and completeness of any legal analysis presented; posts on this Blog do not constitute legal advice. If you discover an error, please reach out to contact@farmbilllaw.org.
