Why It Matters
The federal crop insurance program subsidizes about $15 billion in premiums annually, roughly two-thirds of all premiums, and covers more than 572 million acres, according to a new Congressional Research Service (CRS) report.
The fiscal year 2025 budget reconciliation law, P.L. 119-21, increased premium subsidies and expanded coverage, with the Congressional Budget Office estimating those changes will raise program costs by about $6 billion over fiscal 2025 through fiscal 2034.
The Big Picture
Over the 10 years from 2017 to 2026, the program grew 84% in acres insured and 96% in nominal crop and livestock value insured. Inflation-adjusted annual federal outlays more than tripled, rising from $3.9 billion in fiscal year 2000 to an average of $12.1 billion for fiscal years 2016 through 2025.
Corn, soybeans, wheat, and cotton together accounted for about 74% of all premium subsidies paid from 2016 to 2025. Outlays tend to increase with the number of policies sold, rises in commodity prices, and natural disasters. Those dynamics mean a single severe drought or flood year can push federal costs well above the recent average.
The program operates as a public-private partnership: farmers buy policies from private Approved Insurance Providers (AIPs), which sell and service policies under contracts with the U.S. Department of Agriculture (USDA). USDA provides administrative and operating (A&O) subsidies to AIPs, reinsurance for most policies, and shares gains and losses with AIPs under contract terms.
P.L. 119-21 increased premium subsidies for farm-level coverage for the first time since 2002, expanded maximum coverage levels for Whole Farm Revenue Protection and Supplemental Coverage Option policies, and required USDA to modify AIP contracts to increase A&O subsidies in years of relatively large losses.
Other stakeholders have proposed reducing the program's cost by capping AIPs' underwriting gains, reducing or capping producer premium subsidies, and introducing a means test for premium subsidies. The number of AIPs has decreased over time due to consolidation, and fewer competing providers could affect the terms and availability of coverage in some markets.
The Bottom Line
The House-passed farm bill, H.R. 7567, sponsored by Rep. Glenn Thompson (R-PA), and the Senate committee-reported draft, S. 5526, would make further changes to the program, including freezing A&O subsidy rates for existing policies and establishing a specialty crop advisory committee.
S. 5526 was placed on the Senate Legislative Calendar on Sept. 24, and neither measure has been enacted to date.
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