RH News | Archive
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RMA is or should be aware of the impossibility of its task as a result of the Expert Reviews conducted on its behalf. Those reviews confirm that current A&O subsidies are less than actual costs. As noted by several of the expert reviewers, providing for premium reduction plans invites "gaming" the accounting rules and the already complex financial data differences from company to company to attempt to qualify and gain approval of a premium reduction plan proposal. It is our belief that it is simply not possible to "equalize" all companies' financial information, and thus it is not possible to administer premium reduction plans fairly or equitably.
The Proposed Rule Creates Regulatory and Delivery Confusion
The proposed rule requires premium reduction plans to be submitted to states. This invites state review and "approval", and likely brings additional confusion to the issue of state regulation versus Federal regulation of the program. State review of premium reduction plans will undoubtedly result in inconsistent views from state to state, and between a state(s) and RMA as to the acceptability of plans. Mandating state review without providing funding to the states for the time and expense associated with such review will likely raise old arguments about whether state premium taxes should apply to MPCI. The need for state review simply validates the concern that premium reduction plans have the potential to create confusion and disruption in the delivery of the program, and for that reason the rule allowing for premium reduction plans should not be implemented.
At the local agency level, for agencies that represent more than one approved insurance provider (as is the case with many independent agents), additional marketplace confusion and questions of agency compliance with state and Federal rules will result. Agents will likely find themselves in an uncertain position as they try to balance their responsibilities to their companies, their clients and the rules if they represent companies with approved premium reduction plans which are different. Questions relating to marketing practices and farmers’ equal access to “the best deal” are likely, yet it will be impossible for companies, state regulators or RMA to police and monitor agent activity regarding “equal” selling to all potential clients. It is conceivable that much transferring of current business will occur as agents and clients move from one company or agent to another in seeking the biggest discount and lowest price, and that these transfers could place some approved insurance providers (and thereby also RMA) at risk of overextending their operational and financial capabilities and resources.
Summary
For all of the above reasons, it seems clear that implementing the rule to provide for premium reduction plans at this time will bring more problems than benefits. Program participation has been achieved without such plans, and to implement the proposed rule now will bring more problems, instability and confusion to the program than any possible benefits.
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