Mandatory Spending

Function 350 - Agriculture

Change the Reimbursement for Insurers’ Administrative and Operating Costs in the Crop Insurance Program

CBO periodically issues a compendium of policy options (called Options for Reducing the Deficit) covering a broad range of issues, as well as separate reports that include options for changing federal tax and spending policies in particular areas. This option appears in one of those publications. The options are derived from many sources and reflect a range of possibilities. For each option, CBO presents an estimate of its effects on the budget but makes no recommendations. Inclusion or exclusion of any particular option does not imply an endorsement or rejection by CBO.

Reimbursements for insurers’ administrative and operating (A&O) costs account for roughly one-fifth of the federal cost of the crop insurance program. CBO estimated the budgetary effects of two options that would change those reimbursements:

If lawmakers limited the A&O reimbursement to 9.25 percent of premiums, federal spending from 2018 through 2027 would fall by $2.8 billion.
If lawmakers eliminated A&O reimbursements and allowed crop insurers to charge policyholders to cover their A&O costs, federal spending from 2018 through 2027 would decrease by $10.2 billion.