Today, the Government Accountability Office (GAO) released another report recommending excessive subsidies in the federal crop insurance program be reined in – for both large farm operators and private insurance companies. The report by the independent agency found that individual mega-farms received $6-8 million in taxpayer subsidies in 2022, which is 100 times more than the median U.S. household earns each year. The report also unearthed excessive rates of return (the insurance industry’s term for company profits) enjoyed by taxpayer-subsidized private crop insurance companies – some with parent companies in foreign countries.

As background, the federal crop insurance program has recently become the costliest income subsidy program for certain agricultural producers, primarily those growing corn, soybeans, cotton, and wheat. The Congressional Budget Office (CBO) estimates the program will cost taxpayers a record $16.3 billion in FY23. The program has two primary beneficiaries, which are associated with large costs for taxpayers:

1. Subsidies for farmer and rancher crop insurance premiums. These taxpayer subsidies average 62 cents for every $1 of premium coverage. Crop insurance premium subsidies rose to a record $12 billion in 2022.
2. Crop insurance also provides hefty subsidies to private insurance companies to sell and service policies. These administrative and operating (A&O) subsidies, combined with favorable terms for insurance underwriting gains, reached $3.7 billion in 2022.

There are some staggering statistics from the new GAO report, which should steel the resolve for a Congress that claims to have a renewed focus on tackling our unsustainable national debt:

• Taxpayer subsidies for private insurance companies
  • Taxpayers paid private insurance companies more than $3 million to sell and service two individual crop insurance policies in 2022. Meanwhile, taxpayers paid companies 6,000 times less – $500 or a lesser amount – to sell and service nearly half of all other policies sold in 2022.
  • Private insurance companies subsidized by taxpayers earned an excessive average rate of return of 16.8% from 2011 to 2022. This exceeded the market-based rate of 10.2% by more than 6%.
• Taxpayer subsidies for millionaires, billionaires, large farm operators & more
  • Individuals with annual incomes of more than $900,000 in 2021 received taxpayer-subsidized crop insurance. Unlike every other federal safety net program, businesses can get federally-subsidized crop insurance regardless of their annual income or total wealth. GAO has previously identified numerous millionaires and billionaires receiving taxpayer subsidies each year.
  • Taxpayers provided more than $3 million in subsidies to 19 individual farm operators in 2022. One operation benefited from $7.7 million in subsidies in 2022 alone. GAO found that the top 1% of farm operators received 22% of crop insurance premium subsidies, costing taxpayers $2.6 billion.

Because of the wide discrepancies in who’s primarily benefiting from the federal crop insurance program, GAO recommended reining in taxpayer subsidies for both wealthy farm operators and private insurance companies. According to GAO,

“…reducing premium subsidies for high-income policyholders [those with an annual adjusted gross income of $900,000 or more] likely would not affect the actuarial soundness of the program…”

In addition, GAO noted its previous recommendation that Congress consider repealing a farm bill provision prohibiting taxpayers from realizing savings from reducing excessive subsidies provided to private insurance companies.

While new, the GAO report builds on its prior work, which provided a wide range of recommendations to Congress to rein in wasteful crop insurance subsidies. The new report is timely, with our country’s national debt at an all-time high, farm income setting a new record last year, and the farm bill up for reauthorization. In other words, the stars have aligned. Congress can deliver farmers, taxpayers, and the climate an early holiday gift by committing to further GAO’s common sense reforms.