On September 14, 2020, the Risk Management Agency (RMA) issued a Press release announcing increased subsidies and other improvements to the Livestock Risk Protection (LRP) Insurance Program and on September 16, 2020, RMA issued Product Management Bulletin: PM-20-064. https://www.rma.usda.gov/en/News-Room/Press/Press-Releases/2020-News/USDA-Announces-Increased-Subsidies-and-Other-Improvements-to-the-LRP-Program; https://www.rma.usda.gov/en/Policy-and-Procedure/Bulletins-and-Memos/2020/PM-20-064.
RMA states that the Federal Crop Insurance Corporation’s Board of Directors (Board) approved revisions to the LRP plan of insurance for Feeder Cattle, Fed Cattle, and Swine, under section 508(h) of the Federal Crop Insurance Act, on August 20, 2020. RMA states it is increasing premium subsidies and will make other improvements to the Livestock Risk Protection (LRP) plan of insurance for feeder cattle, fed cattle, and swine starting with the 2021 crop year. RMA states the increased premium subsidy is retroactive to the beginning of the 2021 crop year and is based on the coverage selected by the livestock producer.
|Previous Subsidy Rate|
|Revised Subsidy Rate|
RMA states that other improvements to be implemented include:
- Increasing livestock head limits for feeder and fed cattle to 6,000 head per endorsement/12,000 head annually, and swine to 40,0000 head per endorsement/150,000 head annually
- Modifying the requirement to own insured livestock until the last 60 days of the endorsement
- Increasing the endorsement lengths for swine up to 52 weeks
- Creating new feeder cattle and swine types to allow for unborn livestock to be insured
RMA states that approved insurance providers will need to resubmit any 2021 LRP policies to get the revised subsidy amounts before issuing premium bills to the insured.
ANALYSIS – The first concern is RMA’s statement that the changes, including premium subsidies, are retroactive to the beginning of the 2021 insurance year. The 2021 insurance year for LRP began on July 1, 2020. The contract change date for the 2021 insurance year for LRP was April 30, 2020. The Board did not vote to approve the LRP policy changes until August 20, 2020, and RMA is announcing the changes on September 14 and 16, 2020. There is nothing in the LRP policy that allows for retroactive application of policy changes. Further, RMA has stated no rational basis or explanation of the authority it is using to make these changes retroactive. It is not clear that these changes can be given effect for the 2021 insurance year.
The second concern is with the new revised subsidy rates. The coverage levels provided in the revised subsidy chart do not directly correspond to the coverage levels in the Federal Crop Insurance Act (FCIA) but they can be matched. Looking at the previous subsidy rates for each of the coverage levels specified, they all were under the maximum subsidy allowed. However, this is not true for the revised subsidy rates. Under the FCIA, for any coverage level of 85 percent or greater, the maximum subsidy allowed is 38 percent. On RMA’s revised subsidy chart, coverage from 85-89.99 receives a 45 percent subsidy, coverage from 90-94.99 percent received a 40 percent subsidy, and coverage from 95-100 percent receives a 35 percent coverage level. Only coverage from 95-100 percent is below the maximum subsidy allowed by law.
Under the FCIA, for coverage from 80-84.99 percent, the maximum premium subsidy is 48 percent. On RMA’s revised subsidy chart, 80-84.99 percent coverage receives a 50 percent subsidy. The 80-84.99 percent coverage level revised premium subsidy exceeds the maximum allowed by law.
Under the FCIA, for coverage levels from 70-74.99 percent, the maximum premium subsidy is 59 percent and for coverage levels from 75-79.99, the maximum premium subsidy is 55 percent. On RMA’s revised premium subsidy chart, for these coverage levels, the premium subsidy is 55 percent. This is within the maximum subsidy allowed by law.
No explanation or authority has been provided to support the premium subsidies that exceed the maximum allowed by law. Without such an explanation or basis for authority, it is not clear that the premium subsidies that exceed the maximum allowed by the FCIA can take effect.
All statements made are opinions of the author and are not intended to provide legal opinions or legal advice.