HTML _ RL30739 - Federal Crop Insurance and the Agriculture Risk Protection Act of 2000 (P.L. 106-224)
13-Nov-2000; Ralph Chite; 7 p.

Abstract: On June 20, 2000, the President signed into law the Agricultural Risk Protection Act of 2000 (P.L. 106-224, H.R. 2559), which reduces significantly the farmer cost of acquiring a crop insurance policy beginning in the 2001 crop year. P.L. 106-224 is estimated to add $8.2 billion in new federal spending for the federal crop insurance program over the next 5 years (FY2001-2005), in order to attract more farmers into the program and lessen the need for ad hoc disaster assistance. From 1994 through 1999, the federal government spent an average of $1.5 billion per year on crop insurance subsidies and program costs. The government pays the full cost of the premium for catastrophic (CAT) coverage and pays a portion of the premium for higher levels of coverage. Private insurance companies sell and service the policies, but are reinsured by the government for most of their losses and expenses. Major reforms were made to the crop insurance program in 1994 in hopes of permanently replacing expensive ad hoc disaster payment programs with a more heavily subsidized crop insurance program. Overall farmer participation in the program had increased in recent years, but not enough to forestall the perceived need for ad hoc disaster payments. Moreover, the enactment of a series of multi-billion dollar farm financial assistance packages in both FY1999 and in FY2000 encouraged the 106th Congress to consider further modifications to the crop insurance program. Opposition to crop insurance enhancement came from those concerned that increased premium subsidies encourage further overproduction and price-depressing surpluses, and bring environmentally fragile land into production. P.L. 106-224 addresses many problems with the crop insurance program that were identified by several farm and insurance industry groups. Most of the new spending authorized by the bill is to be used to increase the portion of the premium paid by the government on behalf of the producer for insurance coverage higher than the CAT level, and, for the first time, to subsidize a portion of the additional cost of revenue insurance products. P.L. 106-224 also provides improved coverage for farmers affected by multiple years of natural disasters; authorizes pilot insurance programs for livestock farmers and growers of other farm commodities that are currently not served by crop insurance; gives the private sector greater representation on the crop insurance policymaking board; and eases eligibility requirements for a permanent disaster payment program for noninsurable farmers, among many other provisions. The FY2001 budget resolution (H.Con.Res. 290) made room for the new spending required by P.L. 106-224. The resolution permitted new agricultural program spending of $8.2 billion over the FY2001-05 period for modifications to the federal crop insurance program. [read report]

Topics: Agriculture, Risk & Reform, Federal Agencies

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