Petri, Kind Introduce Legislation to Reform U.S. Crop Insurance Policies

May 15, 2013 Issues: Agriculture

Washington, D.C.U.S. Representative Tom Petri (R-WI) and U.S. Representative Ron Kind (D-WI) along with six of their colleagues today introduced the Assisting Family Farmers through Insurance Reform Measures (AFFIRM) Act. The AFFIRM Act makes bold reforms to crop insurance premium subsidy payments, saves taxpayer dollars and promotes transparency.

The AFFIRM Act limits the total value of crop insurance subsidies to $40,000 per person each year,  eliminates crop insurance premium subsidies for individuals with an adjusted gross income (AGI) of more than $250,000, and requires more of the administrative and operating (A&O) costs to be shared by the private companies that offer coverage. It also limits renegotiation of the Standard Reinsurance Agreement (SRA) and lowers the “target rate of return” that USDA builds into premiums in order to guarantee long-term profitability for crop insurance companies.

“I’m glad to be a part of this bipartisan effort to make important changes to the crop insurance program,” said Rep. Petri.  “Currently, the federal government subsidizes roughly 62% of farmers’ crop insurance premiums at a cost of $9 billion a year.  But America’s small farmers received only 27% of the subsidies.  This bill keeps in place a safety net for farmers who need assistance, while ensuring the program is not exploited at a cost to taxpayers.” 

“The current crop insurance system is extremely wasteful and in need of major reform. The AFFIRM Act will save taxpayers $11 billion over 10 years while still providing a strong safety net for family farmers,” said Rep. Kind. “Unlike other subsidies, Congress does not know who receives crop insurance subsidies. Taxpayers deserve to know where their tax dollars are going, and the AFFIRM Act will make that possible.”

These reforms would be put in place while bringing more transparency into the crop insurance program by requiring the reporting of all parties that receive federally subsidized crop insurance.

From 2001 to 2012, crop insurance companies enjoyed $10.3 billion in underwriting gains while taxpayers suffered a net loss of $276 million.  Over 4,200 farmers received more than $100,000 in premium subsidies in 2011 and 26 received more than $1 million in subsidies. In contrast, the bottom 80 percent of policyholders received only 27 percent of subsidies in 2011, with an average subsidy of around $5,000.  The AFFIRM Act allows family farmers to continue relying on crop insurance while ending subsidies for large agribusinesses that have the ability to manage risk without heavily subsidized coverage.

The AFFIRM Act has the support of a wide range of stakeholders in the agriculture community, including the Environment Working Group (EWG; view their letter of support here), US PIRG, and a coalition of 12 leading conservative organizations (view their letter of support here). Joining Reps. Petri and Kind in sponsoring the bill are Reps. Jim Sensenbrenner (R-WI),  Earl Blumenauer (D-OR), Rosa DeLauro (D-CT), Jim Cooper (D-TN), Jim McGovern (D-MA), and Henry Waxman (D-CA).

"Taxpayers should never be kept in the dark about where their dollars are going — plain and simple," said Scott Faber, Environment Working Group's vice president for government affairs. "That's why EWG is proud to support a bill that will reform our heavily subsidized crop insurance to increase transparency for taxpayers, level the playing field for farmers, and improve the environment for future generations. Our families, our food and our land are worth protecting." 

“Taxpayers for Common Sense appreciates the leadership of Reps. Kind and Petri in making subsidized crop insurance more cost-effective, targeted toward need, and accountable to taxpayers,” said Ms. Ryan Alexander, President of Taxpayers for Common Sense. “The common sense measures in the AFFIRM Act would bring subsidized crop insurance in line with other taxpayer financed supports for agriculture and are an important step toward creating a more effective and efficient agricultural safety net.”

"As the largest subsidy to farmers, crop insurance is in dire need of reforms to make the program more targeted and accountable to taxpayers,” said Andrew Moylan, Senior Fellow with the R Street Institute. “The AFFIRM Act does exactly that by establishing a modest payment limit and means test, by reducing subsidies for industry, and by providing full transparency. Republicans and Democrats have strong disagreements, but they should unite around this common sense legislation. We applaud Representatives Kind and Petri for leading on this important issue in a bipartisan fashion."