On November 25, 2019, the Risk Management Agency (RMA) issued the new 2020 Stacked Income Protection Plan (STAX) policy and Managers Bulletin: MGR-19-028 regarding the changes to STAX for 2020. RMA states that the Agriculture Risk Protection (ARC) and Price Loss Coverage (PLC) programs administered by the Farm Service Agency allows for annual enrollment. RMA also states that the Federal Crop Insurance Act (FCIA) precludes acreage enrolled in ARC or PLC from receiving coverage under STAX and acreage enrolled on ARC from receiving coverage under the Supplemental Coverage Option (SCO). RMA states that in June 2019 RMA released a revised SCO policy for 2020 containing provisions relating to acreage reporting when producer participate in ARC or PLC. RMA states that to comply with the FCIA and other programs, RMA is updating the STAX policy for 2020 with provisions like those in SCO.
RMA states that the policy has been changed to require producers who purchase STAX to annually report acreage that have been, or will be, enrolled in ARC or PLC on their acreage report. RMA states that producers who later enroll in ARC or PLC that were not previously enrolled, or who have misidentified acreage enrolled in ARC or PLC, will be ineligible for a STAX indemnity on such acreage but producers will still owe 60 percent of the premium on the affected acreage. RMA stated that it also modified the STAX policy to clarify that crop insurance data will be the primary data source wen determining expected and final area yields for STAX.
ANALYSIS – The STAX change regarding the enrollment in ARC and PLC is mandated by law but there has been no rational basis provided to require payment of 60 percent of the premium when ARC or PLC acreage is not properly reported or the producer enrolls in ARC or PLC after the acreage reporting date. Sections 2, 23 and 27 of the Common Crop Insurance Policy Basic Provisions contain provisions where indemnity is denied but premium is still owed. In those instances, the amount is 20 percent of the premium. Section 2 involved cases where the policy is voided because if missing or misreported SSNs or EINs for the insured or persons with a substantial beneficial interest in the insured. Section 23 involves violations of the Food Security Act of 1985 and states “We will recover any and all monies paid to you or received by you during your period of ineligibility, and your premium will be refunded, less an amount for expenses and handling equal to 20 percent of the premium paid or to be paid by you.” Section 27 involves situations where the producer falsely or fraudulently conceals the fact that they are ineligible to receive benefits under the Act or if the producer or anyone assisting the producer has intentionally concealed or misrepresented any material fact relating to this policy. In those instances, the policy is void and the producer is required to pay 20 percent of the premium owed to offset costs incurred in the service of the policy.
The actions in sections 2, 23, and 27 of the Basic Provisions that result in no indemnity due appear to be very similar to the actions discussed in this bulletin. To the extent that RMA is now charging an amount of premium in excess of the amounts found in these other sections, RMA needs to provide its rational basis. As stated above, the 20 percent premium owed was based on the amount paid to the approved insurance provider for the sale and service of the policy. Amounts of premium charged over and above the amounts paid for the sale and service of the policy could be considered punitive, which requires specific legislative authority. RMA has no legislative authority to apply any punitive type amounts. RMA only has the legislative authority to impose civil fines in section 515(h) of the FCIA in cases where the producer willfully and intentionally provides false or inaccurate information and those civil fines are $10,000 per violation or the amount of the pecuniary gain. There is nothin in MGR-19-028 to suggest that RMA is applying the civil fines authorized in section 515(h) of the FCIA. RMA may want to revisit the imposition of 60 percent of the premium owed in STAX and SCO.
All statements made are opinions of the author and are not intended to provide legal opinions or legal advice.