Circumventing the Federal Budget Process: Crop Insurance Premium Subsidies

By Carl Zulauf

Over the last two years, Federal crop insurance premium subsidies have been raised far more by procedures outside the Farm Bill than inside the Farm Bill.  Two USDA (US Department of Agriculture) administrative actions raised the premium subsidy rate for ECO (Enhanced Coverage Option) insurance to 80%.  They conservatively are estimated to raise Federal premium subsidies by $13.2 billion over 10 FYs (Federal Fiscal Years).  The 2025 Farm Bill was scored as raising Federal premium subsidies over 10 FYs by $4.4 billion for individual farm insurance units and SCO (Supplemental Coverage Option) insurance.  This case study illustrates how the Federal budget process can be circumvented, calling into question its fiscal integrity and usefulness.

This provision also raises subsidy rates for some enterprise and whole farm insurance units.  US law requires that enterprise and whole farm insurance units have the same dollar premium subsidy per acre, capped at an 80% subsidy, as the equivalent basic or optional unit.

CBO (Congressional Budget Office) projected that, collectively, these changes would increase Federal outlays for premium subsidies by $3 billion over 10 FYs.

2025 Farm Bill – SCO Premium Subsidy

The 2025 Farm Bill raised the Federal premium subsidy rate for SCO area add-up insurance to 80% from 65%.  SCO coverage level was also raised to 90% from 86%, meaning SCO coverage ranges from 90% to whatever coverage level a farmer buys for the underlying multi-peril insurance product.  CBO scored these changes as increasing Federal premium subsidies by $1.4 billion over 10 FYs.

USDA, RMA – ECO Premium Subsidy

In an administrative action dated August 20, 2025, USDA, RMA (Risk Management Agency) raised the premium subsidy rate for ECO area add-up insurance to 80% for crops harvested in 2026 from 65% for crops harvested in 2025. The 65% subsidy rate for 2025 was an increase, via administrative action dated July 29, 2024, from 44% (51%) when combining ECO with individual farm revenue (yield) insurance.  ECO coverage range is 86%-90% or 86%-95%, with the latter overwhelming bought.

The higher ECO premium subsidy rate for 2025 crops resulted in ECO acres increasing to 61.8 million from 15.6 million in 2024.  ECO premium subsidies increased six-fold, from $0.2 billion in 2024 to $1.2 billion in 2025.  Assuming farmers make the same insurance decisions (i.e. no response to raising the subsidy rate from 65% to 80%), the combined increase in ECO Federal premium subsidy rates over the 2024 subsidy rates is estimated to increase Federal premium subsidies over 10 FYs by $13.2 billion (see Data Note).