Large farmers received millions in insurance subsidies, the report said

The federal government last year provided millions of dollars in subsidies to large farmers to pay much of the cost of their crop insurance policies, according to a Government Accountability Office report to be released Monday.

The federal crop insurance program is intended to encourage farmers to protect their crops from natural disasters, extreme weather and other devastating events by purchasing private insurance that is heavily subsidized with taxpayer dollars.

Under the program, farmers can purchase insurance policies to help cover financial losses due to declines in crop prices and poor yields due to natural disasters. Private companies sell the policies, but the federal government covers much of the cost; it pays on average about 62 percent of the premiums and subsidizes the administrative costs of the insurers.

The cost of the federal crop insurance program ballooned last year and reached $17.3 billion in 2022, according to Department of Agriculture data. About $3.7 billion of that amount was paid to insurance companies and agents that sell and service the policies. In 2021, the program cost the federal government approximately $9.4 billion, according to data from the Ministry of Agriculture.

Unlike other farm programs that have income or payment limits, the crop insurance program has no similar restrictions, so wealthy farmers can get millions in federal subsidies to cover the cost of their insurance, regardless of their income.

The report found that 19 policyholders with the largest subsidies each received more than $3 million in federal funds last year to help pay for their insurance. That included a farm in the South that benefited from $7.7 million and a dairy farm in the West that received $6.6 million.

Last year, 1,341 policyholders, or about 0.3 percent of participants, were high-income, meaning they had an average adjusted gross income of at least $900,000, the agency found.

Much of the money is also paid to insurance companies that participate in the program, along with agents who sell and service the policies, the report shows. From 2011 through 2022, the federal government paid insurance companies about $36.6 billion, or about a third of the program’s total cost. This included subsidies for companies’ administrative expenses and their share of the financial gains associated with the policy.

Companies that participated in the program achieved outsized returns, according to the report. From 2011 through 2022, companies received an average annual return of 16.8 percent on premiums retained, surpassing the market-based return of 10.2 percent. In some years, including 2016 and 2017, returns exceeded 30 percent. Companies experienced only one year of losses during that period.

Senator Cory Booker, Democrat of New Jersey, who has done so urged to revise the programmesaid the report showed that a “shocking proportion” of subsidies were “eaten up by companies and agents writing policy for the very largest farms.”

“At the same time, most small and diversified specialty crop farms, including many in my state of New Jersey, do not have crop insurance coverage,” Mr. Booker said in a statement. “This means that even though taxpayers spend more than $1.5 billion each year to ensure farmers receive quality service and understand their options in the crop insurance program, the program is still failing small and diversified farms.”

Historically disadvantaged farmers have participated in the federal program at lower rates. According to the report, by 2022, approximately 7.5 percent of policyholders had self-identified as historically disadvantaged.

Although the federal subsidies are intended to encourage more farmers to buy crop insurance, many smaller farmers still can’t afford to participate, said Scott Faber, senior vice president of government affairs at the Environmental Working Group, a non-profit -profit interest group. He added that the new report contained “staggering numbers” that shed light on the program’s biggest beneficiaries.

“There should be reasonable limits on who can receive subsidies and the amount they can receive,” Mr. Faber said, adding that he also wanted to see “reforms to how much we pay agents and how much profit we guarantee to insurance companies. .”

The program is expected to cost the federal government about $10.1 billion per year over the next decade, according to Congressional Budget Office estimates.

The Government Accountability Office has long recommended changes to the insurance program that could save taxpayers billions of dollars over the next decade, the agency said in the new report. The agency recommended that Congress reduce subsidy rates for high-income farmers and adjust compensation to insurance companies to better align with market rates.

For example, if subsidies for high-income policyholders had been reduced from 62 percent to 47 percent by 2022, the government could have saved about $15 million, according to the report. And if companies achieved market-based returns in 2021 and 2022, the government could have saved $1.5 billion.

However, changes to the crop insurance program could face opposition from agricultural associations. The American Farm Bureau Federationwhich represents farmers from across the country has said it is a “robust” crop insurance program with “no reduction in the premium cost share.”

Anne Schechinger, the Midwest director of the Environmental Working Group, said the report’s findings underscored that taxpayers were “sending billions of dollars to very wealthy companies every year.”

According to the report, federal subsidies for businesses’ administrative and operating costs have steadily increased over the years. From 2011 through 2017, these costs averaged $1.4 billion per year, rising to $1.7 billion per year from 2018 through 2022. In 2022, the federal government paid businesses $2.2 billion for administrative expenses.

In two cases, insurance companies received more than $3 million for selling and servicing a single policy. That included a policy protecting dairy farming and another policy covering the loss of fodder or hay for feeding livestock.

“This part about the money going to agents and companies is especially important because billions of dollars are not going to farmers every year,” Ms. Schechinger said.