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Veteran Advisor
Posts: 1,663
Registered: ‎06-30-2010

Re: Explain how wide spread participation in Welfare lowers cost?

[ Edited ]

I think what the insurance people are saying is related to the overall insurance acre-pool -- the more acres that are covered, the more it spreads out the overall risk.  Those who are more prone to experience losses might be more likely to carry/continue the  insurance -- the more attractive the insurance purchase, the more likely those less risky acres are also insured.

 

Personally, as I've said in the past, I think there needs to be a tiered structure to the premium subsidies.  Currently, there are no limits to the total insurance subsidy one farmer might experience -- it has not been subject to USDA program payment limitations. I really don't think farmers should become ineligible to purchase crop insurance due to the size of their operation (not a limit on loss pay-outs); however, their premium subsidy should be limited.  Without limiting this subsidy, the USDA is assisting and sharing the risk of these ever-expanding operations.  If a farmer wants to farm 20,000 acres, that's okay by me, yet I don't agree with helping him pay the insurance premium to limit his risk to get there, stay there, and keep growing.  By tiered subsidy structure, I mean something like this, just for example --

 

1st $25,000 total base premium, 65% premium subsidy, farmer pays 35%

Next $25,000 total base premium, 50% premium subsidy, farmer pays 50%

Next $25,000 total base premium,  35% premium subsidy, farmer pays 65%

Next $25,000 total base premium,  20% premium subsidy, farmer pays 80%

All base premium over $100,000, -0- premium subsidy, farmer pays 100%

 

So, depending on program payment limitations and how that affects premium subsidies, everyone would still be experiencing some premium subsidies, though those higher up the scale would be also paying for a higher share of their own risk reduction.  It wouldn't surprise me if a structure such as this would impact less than half of all farmers, relative to our current premium subsidies.