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Due to its discriminatory nature at the insurance provider level, the proposed rule will likely alter delivery of the program. While it won't force providers that are delivering in only a few states to deliver in more states, it may force providers that are already delivering broadly to retract to fewer states. The proposed rule states that this is not the intended outcome, yet it is the likely outcome due to competitive forces and due to the requirements of the proposed rule relative to an equal discount in all states for a provider.

Delivery alterations that result as competitors react to the rule in the marketplace will ultimately affect availability and service to policyholders in a negative manner.

The Proposed Rule Will Be Impossible To Administer Fairly

The structure and manner in which company financial information is maintained and available varies between companies for numerous legitimate and acceptable business reasons. Some companies use managing general agents, some do not; some offer crop insurance only, some do not; some are large, some are small. These variances and the resulting differences in the way financial information is accumulated, allocated, reported and maintained simply cannot be "equalized" and analyzed in a manner that treats all companies on an equal basis.

Under the proposed rule, RMA would be required to attempt this impossible task. Thus, it will be impossible for RMA to implement the proposed rule on a non-discriminatory basis, and the result will negatively affect policyholders as the delivery system reacts if some plans are approved and others are not.

An additional concern with the proposal is that the manner in which financial information is requested by and reported to RMA is likely to disadvantage some providers. An example of this is the seeming disparity between a company that retains the majority of the risk on the policies it writes, and purchases commercial stop loss reinsurance protection, versus a company that cedes the majority of its retained premium to the commercial quota share reinsurance market. Under RMA’s current reporting forms relating to the SRA, the company that retains the risk and purchases stop loss reinsurance would include the stop loss reinsurance premium as an expense in Exhibit 18B (line 24). The quota share company would not have this expense to report, thus it would appear more likely to qualify for approval of a premium reduction plan since it has less overall expense. Further, the quota share company would appear to have more income (Exhibit 10o, line 9), since it would likely receive ceding commission from reinsurers on its quota share cession; the company that retained the risk and purchased stop loss reinsurance would not receive such commission. These reporting items would give the impression that the company that retains the risk and purchases stop loss reinsurance has higher expenses, and thus it would be less able to qualify for approval of a PRP plan under the proposal, yet in reality it may be the stronger of the two companies financially.

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