Boondoggle

"Prevented Planting" Insurance Plows up Wetlands, Wastes $Billions

April 28, 2015

Boondoggle: Introduction

"Prevented planting" is a component of the federal crop insurance program that is supposed to compensate growers when extreme weather or other factors make it impossible to plant their crops. Farmers can file claims when certain circumstances – excessive moisture (too much rain or snow), drought, flooding, cold wet weather, heat or the failure of an irrigation supply – keep them from planting their crop. The "prevented planting" coverage is part of underlying insurance policies that pay out whenever bad weather or falling crop prices result in growers' yield or revenue falling below the policies' guaranteed level.

Congress made prevented planting coverage a basic part of crop insurance policies in the Federal Crop Insurance Reform Act of 1994. It went into effect in 1995 and is administered by the U.S. Department of Agriculture.

USDA's Risk Management Agency (RMA) operates the program through arrangements with private companies, called approved insurance providers (AIPs), that sell and service the policies. The crop insurance program is heavily subsidized by taxpayers, which means growers pay far lower premiums than they would if the insurance worked the same as auto, home, health or other insurance sold by the private sector. The Risk Management Agency also pays the companies for the administrative costs of selling and servicing the policies, further lowering the premiums paid by growers.

A farmer files a claim by notifying the insurance company that he was unable to plant. The company then assigns a loss adjuster who is responsible for determining whether the acreage that couldn't be planted is eligible for a payout. The adjuster must consider a complicated set of criteria. The two most important are whether the acreage could be planted and harvested under normal conditions and whether other growers in the area were also unable to plant.

In 1999, just four years after prevented planting coverage became available, the Risk Management Agency's inspector general issued a scathing report. It found that:

  • The program lacked sufficient controls to prevent abuse.
  • 43 percent of the claims reviewed should not have been paid.
  • Loss adjusters often had conflicts of interest with the growers whose claims they were evaluating.

In 2013, the Office of Inspector General issued another report that showed that the problems with prevented planting coverage had persisted despite the agency's efforts to tighten controls over the decisions made by loss adjusters.

EWG decided to look more closely at prevented planting coverage to answer two important questions:

  • Do the payouts encourage growers to plow up critically important wetlands in the Prairie Pothole Region?
  • How much of the billions of dollars paid on prevented planting claims goes for acreage that is not and should not be eligible for coverage?

This report summarizes what we found.