Congress extended the 2023 version of the farm bill through September to give lawmakers time to pass a new iteration.
Part of the bill, the crop insurance title, or Title 11, makes coverage available to agricultural producers from private insurers to mitigate the potential financial risks of adverse market and growing conditions. It is the second-largest title by cost, totaling nearly $78 billion in the bill’s previous iteration. The title is divided into two main components, the Federal Crop Insurance Program, or FCIP, and disaster programs.
Farm Bill Basics
The farm bill is an omnibus, multiyear law that funds crop insurance, crop subsidies, and research to assist food production and sustainable agricultural practices. It also pays for food assistance programs, including the Supplemental Nutrition Assistance Program, which supports nearly 42 million Americans. More from NCSL:
The FCIP is permanently authorized by the Federal Crop Insurance Act; unlike some other farm bill programs, its authority was not impacted by the bill’s expiration. The FCIP receives about $7 million in mandatory appropriations for administrative costs, which are expected to reach $8 billion annually between fiscal years 2021 and 2025. The remaining balance is covered by discretionary funding. The program is administered by the Federal Crop Insurance Corporation, or FCIC, which is managed by the Agriculture Department’s Risk Management Agency. Federal FCIP spending reached $17.3 billion in 2022, according to the Government Accountability Office.
Rather than acting as the direct insurer, the FCIC partners with approved private sector insurance companies to handle day-to-day operations of crop insurance policies, including claim determinations and indemnity payments. The Agriculture Department subsidizes the private companies’ administrative and operating costs and covers their underwriting gains to incentivize the partnerships. This cost $3.7 billion in 2022, according to the GAO.
In addition to subsidizing the private insurers’ costs, the FCIP subsidizes policy premiums at around 60% for traditional crop insurance policies taken out by agricultural producers. This cost $12 billion in 2022. A variety of insurance policy types, coverage levels and term lengths are available through the FCIP, including:
- Yield insurance plans
- Revenue insurance plans
- Supplemental coverage options
- Stacked income protection plans
- Index insurance products
- Livestock insurance plans
FCIP policies currently cover 124 commodities, including several traditional field and specialty crops, though coverage for some may be restricted to certain areas. The policies help limit agricultural producer losses caused by damaging environmental conditions and adverse market conditions. Federal crop insurance is known as “multi-peril” protection because it covers several possible risks; private sector crop insurance typically insures the farmer against only one risk type. FCIP policies are renewed automatically, unless canceled by the insurer or the insured.
The core disaster programs in the crop insurance title are:
These disaster programs are all administered by the USDA’s Farm Service Agency and, like the FCIP, are permanently authorized. They are intended to provide risk management for producers whose crops are not insurable under the FCIP.
The crop insurance title in the 2018 farm bill increased reference prices for the majority of the acres covered by the FCIP and improved coverage options. The 2018 bill also authorized coverage for industrial hemp crops.
According to the Congressional Budget Office, the crop insurance title is projected to cost $124 billion between FY 2025 and FY 2034. Congress has indicated that the next farm bill will be budget neutral. Much of the debate around the crop insurance title is focused on funding for proposed changes, which could include:
NCSL supports a state-federal partnership to develop a fair and affordable crop insurance program that complements risk management tools available in the marketplace; a program that promotes informed production and management decisions; and federal efforts to encourage private-sector development of innovative risk management tools. However, any crop insurance plan must not adversely affect states’ abilities to levy premium taxes, regulate the business of private insurance or set solvency standards for private crop insurers.
NCSL remains committed to furthering the priorities of states, farmers, ranchers and foresters by promoting increased federal-state communication and coordination. NCSL will advocate for the continuation of programs that benefit these important stakeholders in the agricultural sector.
Megan Bland is a legislative specialist in NCSL’s State-Federal Affairs Division.