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In Farm Bill, Cuts Balanced by Positive Changes

Congress finally passed the omnibus Farm Bill last week. The margins in the House (318-106) and Senate (81-15) are enough to override a possible veto...
May 20, 2008

Congress finally passed the omnibus Farm Bill last week. The margins in the House (318-106) and Senate (81-15) are enough to override a possible veto by President Bush.

Included in the 2008 Farm Bill Extension Conference Report are $5.6 billion in cuts from the Federal Crop Insurance Program. Included in the cuts is an $800 million cut to the administrative and operating reimbursements for participating crop insurers. Despite this, the conference bill had the support of the crop insurance industry, with the American Association of Crop Insurers, Crop Insurance Professionals Association, Crop Insurance Research Bureau and the Rural Community Insurance Services are all listed among 557 agriculture-related groups who supported the bill. PIA serves on the lobbying group headed by AACI, and also signed on in support.

While the 2008 Farm Bill does contain a reduction in reimbursement rates, it contained two provisions that are positive for insurance agents:

  1. The bill repeals premium reduction plans (PRPs), which have been a source of increasing controversy and regulatory review;
  2. The bill strengthens anti-rebating laws with an eye to eliminating opportunities for "rebating schemes" to operate.

However, as expected, the bill also includes a cut to the A&O reimbursement. This was part of Congress' overall reduction approach to USDA programs and subsidies, due to the current high commodity prices.

What It Means to Agents:  The very good news specific to federal crop insurance is that USDA, FCIC, RMA and state DOIs all began to more clearly see the conflicts and negative opportunities that arise from misguided uses of the PRP option. This included regulators really understanding how federal crop insurance loopholes in the wording of their requirements on state anti-rebating were being abused. The two Congressional actions -- to eliminate PRPs and strengthen anti-rebating prohibitions -- demonstrate that the feds finally "got it" regarding the critical improvements needed in this area that PIA members have been reporting and documenting for federal crop officials.

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