Bill Introduced To Cut Insurance Subsidies and Save Taxpayers $4 Billion

Source: Senator Jeff Flake (R - AZ)

Washington, D.C. - September 9, 2017 (The Ponder News) -- U.S. Sens. Jeff Flake (R-Ariz.) and Jeanne Shaheen (D-N.H.) today introduced a bipartisan bill to allow taxpayers to realize an estimated $3.9 billion in savings, according to the Congressional Budget Office. The bill targets federal subsidies supporting windfall profits for private crop insurance companies, while in no way impacting farmers’ ability to purchase reasonably priced crop insurance.

The bill amends the Federal Crop Insurance Act to lower the Standard Reinsurance Agreement (SRA) rate of return from 14.5 percent to 9.6 percent. The SRA is an agreement negotiated between the U.S. Department of Agriculture (USDA) and the private insurance companies that determines the amount of taxpayer subsidies that will be paid to those private companies for participating in the federal crop insurance program, as well as the amount of risk shouldered by the federal government.

A reduction to 8.9 percent in the SRA rate of return was already included in the 2015 budget deal passed by Congress and signed by President Obama, but crop insurance advocates were able to have this change repealed those savings through an omnibus spending bill. Reducing the SRA rate of return to 9.6 percent will only impact the profits that crop insurers make, and it will have no impact on farmers’ crop insurance prices or the availability of crop insurance.

The bill also ends the provision prohibiting the USDA’s Risk Management Agency (RMA) from realizing significant taxpayer savings through regular renegotiations of the SRA. When the SRA was previously renegotiated in 2010, over $6 billion in taxpayer savings was found. Unfortunately, the 2014 farm bill prohibits the USDA from finding any additional savings that could reduce the federal deficit, and requires any savings that happen to be found be put back into the crop insurance program.

“With the national debt fast approaching an unprecedented $20 trillion, cutting wasteful federal subsidies to big insurance companies and saving the taxpayers almost $4 billion in the process just seems like common sense to me,” said Flake. “These much-needed reforms will, not only save taxpayers billions of dollars, but also maintain farmers’ access to crucial, affordable crop insurance.”

“The costs of the crop insurance program are skyrocketing unnecessarily,” said Shaheen. “We can ensure protections for farmers without putting taxpayers on the hook to guarantee enormous profits for insurance companies. This bipartisan legislation will not impact insurance options available to farmers and will save taxpayers billions of dollars.”

Background:

In July 2017, the U.S. Government Accountability Office released a study finding the crop insurance program’s target rate of return does not reflect market conditions. Read that full report here.

On Nov. 5, 2015, Flake and Shaheen introduced the Assisting Family Farmers through Insurance Reform (AFFIRM) Act, a bipartisan bill to reform the crop insurance system. Read more on the bill here.