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2008 Farm Bill Side-By-Side

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Title XII: Crop Insurance

Corn field with storm approachingReduces subsidies to insurance companies for selling and servicing crop insurance policies. Increases administrative fees paid by farmers for minimum insurance coverage level. Requires studies and adjustments to improve organic crop insurance coverage. Introduces Supplemental Agricultural Disaster Assistance Program that supplements crop insurance coverage and provides disaster assistance for livestock (including aquaculture and honey bees), forage, and tree and nursery crops.

Provision name:

Crop Insurance is available under several plans of insurance and coverage levels for a wide variety of crops. Crop insurance policies are sold and serviced by private insurance companies under premium rates and contract terms set by Federal Crop Insurance Corporation (FCIC) and administered by USDA's Risk Management Agency (RMA). Premiums and delivery costs are federally subsidized.

Premiums for crop insurance, amounting to expected indemnities plus a reserve, and administrative fees are paid by producers and by FCIC (premium subsidies).

 
Previous Legislation 2008 Farm Bill

Premium subsidies established under Federal Crop Insurance Act (FCIA), as amended by Agricultural Risk Protection Act of 2000 (ARPA). Subsidy rates varied by plan of insurance and coverage level.

Reduces premium subsidy rates for area yield and revenue plans. Premium subsidy rates for other plans of insurance and coverage levels are unchanged.

Premiums for "catastrophic" (CAT) coverage level were entirely subsidized. Producer paid only an administrative fee of $100/crop/county.

Continues full subsidization of CAT premiums. Increases administrative fee charged for CAT to $300/crop/county.

ARPA allowed insurance companies, with approval of FCIC under certain conditions, to offer Premium Reduction Plans (PRPs) to producers. Appropriations legislation in 2006 and subsequent years prohibited acceptance of PRPs.

Repeals authority to offer PRPs.

Premiums, offset by any indemnities, were billed and paid at harvest time.

Sets Aug 15 as billing date for crop insurance premiums, beginning in 2012 reinsurance year.

Standard Reinsurance Agreement (SRA) negotiated by FCIC and insurance companies, specifies Administrative and Operating (A&O) subsidies paid to insurance companies and shares of underwriting gains or losses accruing to companies.

 
Previous Legislation 2008 Farm Bill

Authorized FCIC to renegotiate Standard Reinsurance Agreement (SRA) once during reinsurance years (July 1-June 30) 2001-05. SRA renegotiated in 2005.

Allows that FCIC may renegotiate SRA to be effective in reinsurance year 2011 and once every 5 years unless adverse circumstances exist. As part of renegotiation, FCIC must consider alternative methods to determine rates for payment of companies' administrative and operating costs (A&O subsidies). FCIC must also look for specific ways to cut A&O for 2011 renegotiations. Changes to SRA to incorporate changes in Federal law are not considered renegotiations.

A&O subsidy rates negotiated in 2005 SRA. Rates varied by plan of insurance, year, and coverage level. For additional coverage levels (buy-up) other than area plans of insurance, rates ranged from 18.1 to 24.2% of amount of premium, depending on year and coverage level. For area plans, rates ranged from 18.1 to 22.4%. For CAT, instead of A&O subsidy, FCIC paid companies amount equal to 7.0% of premium for loss adjustment expenses.

Continues to vary rates by plan of insurance and coverage level. Reduces each A&O subsidy rate for additional (buy-up) coverages, except area plans, by 2.3 percentage points, though only 1/2 of reduction will apply in a State in year when State loss ratio (indemnities divided by premiums) exceeds 1.2. Reduces rates for area plans to 12%. Reduces CAT rate to 6%.

A&O subsidies and CAT reimbursements were paid as acreage reports were filed by companies, usually few months after planting.

Requires FCIC to pay A&O subsidies and CAT reimbursement as soon as practicable after Oct 1, effective with reinsurance year 2012.

Underwriting gains were paid to companies when premiums, net of indemnities, were paid by producers and FCIC, usually shortly after harvest time.

Requires FCIC to pay companies underwriting gains on Oct 1, effective with reinsurance year 2011.

Program Administration and Integrity

 
Previous Legislation 2008 Farm Bill

No similar provision.

Requires that native-sod acreage that has been tilled for production of an annual crop be ineligible for crop insurance during first 5 years of planting in Prairie Pothole National Priority Areas with approval by governor of the respective State.

Program's statutory target loss ratio (indemnities divided by premiums) was 1.075.

Reduces target statutory loss ratio to 1.0.

Restrictions placed on payment of insurance premiums and administrative fees, including offering rebates, by others on behalf of producers.

Clarifies restrictions on payment of insurance premiums and fees by others. Limits payments on behalf of producers by cooperatives and trade associations to CAT administrative fees. Allows patronage dividends by cooperatives previously approved by FCIC to continue.

No similar provision.

Prohibits producer from obtaining an insurance agent's license for sole purpose of benefiting from insurance sales commissions on crop insurance policies of producer or producer’s immediate family.

Funded "data mining" to identify unusual crop insurance claims.

Reprograms existing mandatory funding to continue "data mining" project.

No similar provision.

Requires special emphasis on risk management strategies, education, and outreach targeted at beginning farmers or ranchers, legal immigrant farmers or ranchers attempting to become established producers in U.S., socially disadvantaged farmers or ranchers, farmers or ranchers preparing to retire, and new and established farmers or ranchers converting production and marketing systems to pursue new markets.

Insurance of Organic Crops

 
Previous Legislation 2008 Farm Bill

No similar provision.

Requires FCIC to contract for studies of organic production coverage improvement. Unless studies document "significant, consistent, and systemic variations in loss history between organic and nonorganic crops," requires FCIC to eliminate or reduce premium surcharge for organic production. Studies to include development of procedure to offer additional price election that reflects actual prices received for organic crops.

Pilot Programs and New Product Development

 
Previous Legislation 2008 Farm Bill

Expanded Pilot program of insurance coverage based on producer's historical Adjusted Gross Revenue (AGR).

Continues Pilot program. Requires FCIC to contract for study of AGR policies for beginning farmers.

Authorized FCIC to offer pilot programs. Pilot programs for pasture, rangeland, and forage for livestock production were initiated.

Requires FCIC to establish pilot programs of insurance for camelina, sesame (in Texas), and grass seed (in Minnesota and North Dakota).

No similar provision.

Requires FCIC to contract for studies of insurance policies for energy crops, aquaculture, poultry, apiary (bees), and skip-row cropping practices (for corn and sorghum in Central Great Plains).

Other Risk Management Provisions

 
Previous Legislation 2008 Farm Bill

Noninsured Assistance Program (NAP), administered by USDA's Farm Service Agency, provided coverage similar to CAT insurance for crops for which crop insurance was not available. Producers were required to pay fee of lesser of $100/crop/county or $300/producer/county, not to exceed $900 for producers with farming interests in multiple counties.

Increases NAP fee to lesser of $300/crop/county or $750/producer/county, not to exceed $1,875 for producers with farming interests in multiple counties.

No similar provision.

Requires that native-sod acreage that has been tilled for production of an annual crop be ineligible for NAP during first 5 years of planting in Prairie Pothole National Priority Area with approval by governor of the respective State. Provision does not apply to areas that are 5 acres or less.

Provision name:

Supplemental Agricultural Disaster Assistance (SADA)

Previous Legislation 2008 Farm Bill

Agricultural disaster assistance provided as ad hoc legislation.

Provides disaster assistance payments to producers of eligible commodities (crops, farm-raised fish, honey, and livestock) in counties declared by Secretary of Agriculture to be "disaster counties," including counties contiguous to disaster counties and any farms with losses in normal production of more than 50% in calendar year. SADA is effective only for losses incurred as result of a disaster, adverse weather, or other environmental condition that occurs on or before Sept 30, 2011.

Requires producers to obtain crop insurance for insured commodities or pay administrative fees for crops covered by NAP to be eligible for SADA. For crop year 2008, eligible producers may buy-in to program within 90 days of enactment of 2008 Farm Act. Socially disadvantaged and limited-resource farmers and ranchers must file appropriate paperwork but are exempt from these fees.

Agricultural Disaster Relief Trust Fund to fund SADA. See Title XV, Agricultural Disaster Relief Trust Fund.

 

Supplemental Revenue Assistance Payments (SURE) are made to eligible producers on farms in disaster counties that incurred crop production or crop-quality losses or both during crop year.

 
Previous Legislation 2008 Farm Bill

No similar provision.

Provides payments at 60% of difference (if greater than zero) between disaster assistance program guarantee and total farm revenue, where revenue includes all crops produced on farm.

No similar provision.

Disaster assistance program guarantee is sum of:

  • 115% of insured value of each insurable commodity
  • 120% of value of noninsurable commodity = 100% of NAP price x acres planted x higher of adjusted NAP yield or CCP program yield

No similar provision.

Total farm revenue is sum of:

  • acres harvested x estimated actual yield x national average market price
  • 15% of any direct payments
  • all CCP and Average Crop Revenue Election (ACRE) payments and marketing loan benefits
  • any prevented plantings payments
  • crop insurance indemnities and NAP payment
  • any other related Federal natural disaster payments

Livestock Indemnity Payments

 
Previous Legislation 2008 Farm Bill

No similar provision.

Provides payments to eligible producers for livestock death losses in excess of normal mortality due to adverse weather. Indemnity payment rate is 75% of market value of applicable livestock on day before death, as determined by Secretary.

Livestock Forage Disaster Program

 
Previous Legislation 2008 Farm Bill

No similar provision.

Provides payments to eligible producers of covered livestock for grazing losses due to drought or fire (on public managed land). Payment rates based on monthly feed costs, as defined in SADA.

Emergency Assistance for Livestock, Honey Bees, and Farm-Raised Fish

 
Previous Legislation 2008 Farm Bill

No similar provision.

Provides emergency relief to eligible producers of livestock, honey bees, and farm-raised fish for losses due to disease, adverse weather, or other conditions not covered by Supplemental Revenue Assistance Payments, Livestock Indemnity Payments or by Livestock Forage Disaster Program. Total payments limited to $50 million/year.

Orchard and Nursery Tree Assistance Program

 
Previous Legislation 2008 Farm Bill

Authorized Secretary to provide assistance to eligible orchardists who suffered losses greater than 75% of cost of replanting trees lost due to natural disaster, adjusted for normal mortality.

Provides assistance to eligible orchardists and nursery tree growers for trees lost to natural disasters. Assistance includes reimbursement of 70% of cost of replanting trees in excess of normal mortality or sufficient seedlings to reestablish stand and reimbursement of 50% of cost of salvaging damaged trees and preparing land to replant trees in excess of normal mortality.

Payment Limitations

 
Previous Legislation 2008 Farm Bill

No similar provision.

Payment limits for adjusted gross income and direct attribution limits apply to disaster assistance payments. See Title I, Payment Limits and Income Eligibility. Limit is $100,000/person.

Provision name:

Fisheries Disaster Assistance

 
Previous Legislation 2008 Farm Bill

No similar provision.

Requires Secretary to transfer $170,000,000 of CCC funds for fiscal year 2008 to Secretary of Commerce for National Marine Fisheries Service to distribute to commercial and recreational members of fishing communities affected by salmon fishery failure in areas of California, Oregon, and Washington designated under Magnuson-Stevens Fishery Conservation and Management Act.

Provision name:

Small Business Loan Program provides guidance on disaster planning and response logistics for small businesses and nonprofit organizations. Also addresses eligibility for disaster-loan assistance. These nonagricultural provisions are not summarized.

 
For more information, contact: Robert Dismukes

Web administration: webadmin@ers.usda.gov

Updated date: October 6, 2008