On the issue of means testing in crop insurance, the devil is certainly in the details. But in order to actually find that devil, all you need is a calculator.
Take, for example, the introductory remarks on the Senate floor by Sen. Dick Durbin (D-IL), who in the context of his amendment to means test crop insurance, inaccurately stated that farmers who were flagged by the amendment for making too much money or having too large of an operation would see a small, 15 percent increase in their premium.
What the Senator was actually describing would be a 15 percentage point reduction on the premium discount, which would result in huge increases in the real cost of farmer premiums. For example, for those farmers who purchase 75 percent coverage, premiums would rise by 37 percent. And the lower the level of coverage purchased by farmers (meaning the higher the deductible the farmer must pay) the higher the increase on the percent of their premiums they have to pay. For example, a farmer who purchases 50 percent coverage will see a 45 percent increase in the premiums he or she pays.
The problem with increasing crop insurance premiums is that it reduces participation in crop insurance, reduces coverage levels that farmers can afford, and drives up the cost of premiums for everyone else purchasing policies, particularly small and medium-size farmers.
Remember that farming is feast or famine. Earnings in one good year must be able to cover not just that year but also perhaps the next year or maybe a successive number of bad years. By increasing premiums on farmers by as much as 45%, we are injuring a farmer’s or rancher’s ability to do this.
Here’s to hoping there are lots of Senators, and staffers, who will do the math and reject this amendment.