The Reconciliation Farm Bill: Top Five Most Problematic Changes to Farm Policy, #2

By Jonathan Coppess

The number two position in the top five most problematic changes to farm policy belongs to the third and final entry for crop insurance (farmdoc daily, August 14, 2025 (#4); July 31, 2025 (#5)). That fact alone raises concerns and the most concerning change to crop insurance in the Reconciliation Farm Bill are the increased coverage levels and premium subsidies for the Supplemental Coverage Option (SCO) crop insurance policies. CBO projected an additional $1.4 billion in spending for these changes (CBO, July 21, 2025). Those additional projected costs, like all increases in farm policy assistance, were paid for by reducing food assistance in the Supplemental Nutrition Assistance Program (SNAP). At a monthly average benefit per person, that is the equivalent of helping 7.6 million people purchase food in a month.

Background

The Supplemental Coverage Option (SCO), federally subsidized and reinsured supplemental crop insurance, was created by Congress in the 2014 Farm Bill (P.L. 113-79, Section 11003). Farmers could purchase policies that provided area-wide (e.g., county) coverage from 86% of the insurable yield or revenue down to the underlying buy-up policy that the farmer purchased. Policy premiums were subsidized at 65% of the total cost of the policy premium. The House version of SCO in the 2014 reauthorization effort designed it to begin coverage at 90% of the area (county) loss but the conference committee settled on 86% coverage, or a 14% deductible range (113 H.R. 2642eh).

Importantly, SCO created a much closer linkage to the farm program subsidy programs, ARC and PLC. SCO was designed, especially, as a counter to the ARC-CO program (calculated using 86% of the five-year Olympic moving average county yields). If a farmer enrolled the base acres of a crop in ARC-CO, they were not able to purchase SCO regardless of the decoupled design of the former but not the latter. Because it was included in the crop insurance title, SCO was permanently authorized and not at risk of expiration like ARC and PLC. Considering that the 2014 Farm Bill eliminated direct payments under budget pressures, building a permanently authorized alternative in crop insurance as a backstop to future pressures against farm subsidy programs may have been an unstated part of the reasoning. Either way, SCO blurred the lines between decoupled farm subsidies and subsidized crop insurance—a point that takes on new meaning with the changes in the Reconciliation Farm Bill discussed herein.

Discussion

After an initial slow start, SCO has grown in recent years. Figure 1 illustrates the policy’s growth in total premium, total indemnities and total policies earning premium as reported by USDA’s Risk Management Agency (USDA-RMA, Summary of Business). Total policies earning premium topped 20,000 nationwide in 2019, peaked at over 42,000 in 2023 but dropped to just over 30,000 in 2024. The data from these six years will be used throughout the discussion.