Farmers are exposed to financial losses because of production risks— droughts, floods, and other natural disasters—as well as variations in the market prices of their crops. Through the federal crop insurance program, participants can insure against losses on more than 100 crops. These crops include five major crops (corn, cotton, grain sorghum, soybeans, and wheat), which accounted for 86 percent of the program premiums in 2013, minor crops (field crops other than major crops and livestock), and specialty crops (fruits, vegetables, nursery crops, and tree nuts). Crop insurance participants may be individuals or legal entities—such as trusts, partnerships, and corporations—and members of an entity may share ownership of an insurance policy. Participants can generally select various types of crop insurance policies, including yield-based plans, which protect against declines in production, and revenue-based plans, which protect against declines in production, price, or both. Some plans, however, are not available for all crops or in all locations. Participants may also choose between two types of coverage: (1) catastrophic coverage, which insures 50 percent of normal yield and 55 percent of the estimated market price of the crop, and (2) additional or “buy-up” coverage, which insures 50 percent to 85 percent of normal yield and up to 100 percent of the estimated market price of the crop. Beginning in 2015, participants have the option of buying insurance policies designed to reimburse “shallow losses,” to cover the portion of losses that is applied toward meeting a plan’s deductible. In addition, participants may choose what type of units (certain number of acres for a specific crop) to insure. Basic units cover all plantings of a crop in a single county with the same tenant and landlord; optional units are basic units divided into smaller units by township section; and enterprise units cover all plantings of a single crop in a county, regardless of the tenant and landlord structure. Enterprise units are generally more geographically diverse, so this type of unit is less risky and is charged a lower premium. The federal government has played an active role in helping to mitigate the effects of production risks on farm income by promoting the use of crop insurance through subsidies of premiums. The federal government’s premium and administrative expense subsidies for crop insurance policies are not payments to participants, but they can be considered a financial benefit to participants. Without a premium subsidy, crop insurance participants would have to pay the full amount of the policy premium. And, without an administrative expense subsidy, premiums would likely be higher because insurance companies would have to reflect the full cost of administering the policies in those premiums. The federal government provides crop insurance premium subsidies in part to achieve high participation and coverage levels. High participation and coverage levels may reduce or eliminate the need for congressionally authorized ad hoc disaster programs to help farmers recover from natural disasters, which can be costly. For example, under three separate ad hoc disaster programs, USDA provided $7 billion in payments to farmers whose crops were damaged or destroyed by natural disasters from 2001 to 2007. In 2012, Congress did not enact ad hoc disaster assistance legislation despite a major drought affecting a large portion of the United States. Congress sets premium subsidy rates, meaning the percentage of the premium paid by the government. Premium subsidy rates vary by the level of insurance coverage, the type of units covered by the policy, and the geographic diversity of crops insured. For most policies, the statutory subsidy rates range from 38 percent to 80 percent of the premiums. On average, premium subsidy rates were 62 percent in 2014 for these policies. The two new shallow loss insurance plans have premium subsidy rates of 80 percent and 65 percent. For catastrophic coverage, the federal government pays 100 percent of premiums, and participants pay a $300 administrative fee for each crop that they insure in each county. Administrative expense subsidies, which are paid to insurance companies, are determined as a percentage of total premiums and vary by policy type. Unlike the crop insurance program, for more than a decade, USDA’s farm and conservation programs have had statutory income limits setting the maximum amount of income that participants can earn and still remain eligible for program payments. Participants subject to the income limits are individuals, entities, and members of entities. The 2008 farm bill set separate limits for an individual’s or a legal entity’s farm income and nonfarm income, and those limits were in effect from 2009 through 2013, The income subject to both but the limits changed in the 2014 farm bill.limits was based on AGI, as defined by the Internal Revenue Service (IRS), or a comparable measure, and averaged over the 3 most recent tax years. These limits varied by program and changed over time but, in general, they specified that participants in farm programs could not receive payments if their nonfarm income exceeded $500,000 or if their farm income exceeded $750,000. Participants in conservation programs generally could not receive benefits if their nonfarm income exceeded $1 million, unless at least two-thirds of their total AGI was farm income. The 2014 farm bill established a single income limit of $900,000 for farm and conservation programs. Appendix II provides additional information about the income limits established under the 2008 farm bill and FSA’s enforcement of these limits. Although the crop insurance program has no income limits for its participants, Congress has considered establishing an income threshold above which participants would receive reduced subsidies. In the Senate- passed version of the 2014 farm bill, crop insurance participants with AGI in excess of $750,000, averaged over 3 years, would have had their premium subsidies reduced by 15 percentage points. Implementation of this provision would have been contingent on the results of a study on the limitation’s effects. that supported the provision in the Senate-passed version of the farm bill, but the provision was not included in the final version of the farm bill. Also, in the House of Representatives, an amendment to its version of the farm bill was proposed that would have eliminated premium subsidies for participants with average AGI exceeding $250,000, but the amendment was defeated. The provision would not have reduced subsidies for catastrophic coverage. S. 954, 113th Cong. § 11033, (as passed by Senate, June 10, 2012). to be eligible for premium subsidies, crop insurance participants that plant certain crops on land that is prone to erosion must have a conservation plan, and participants must not convert wetlands for crop production. About 1 percent of crop insurance participants would have been affected if subsidies were reduced for the highest income participants. These participants had some characteristics that differed from other crop insurance participants but overall had characteristics similar to other participants. Specifically, the highest income participants insured more farmland and were provided more in premium subsidies than other participants, on average. In general, however, the highest income crop insurance participants and other participants insured farmland in the same states, insured major crops most frequently, and made similar choices about insurance protection. About 1 percent of crop insurance participants that also applied for farm and conservation programs with income limits would have been affected if subsidies had been reduced for the highest income participants from 2009 through 2013, based on our analysis of RMA and FSA data. The number of highest income crop insurance participants was about 7,500 annually on average but, as shown in table 1, the annual number decreased from 2009 through 2013. An FSA official told us that this decrease in recent years may be the result of fewer crop insurance participants applying for farm and conservation programs after they had been determined ineligible for these programs’ payments because of their income. As a result, this analysis may understate the annual number of highest income crop insurance participants. In terms of premiums, the highest income participants accounted for about 1 percent of the premiums annually, on average, from 2009 through 2013. Our analysis does not include all crop insurance participants because we relied on FSA data to determine whether they exceeded income limits, and FSA only had data on those that also participated in farm and conservation programs. Our analysis included about 66 percent of crop insurance participants, which accounted for about 73 percent of premiums. Nevertheless, results from USDA’s annual survey of a sample of all U.S. farms confirm that less than 1 percent of crop insurance participants would have been affected from 2009 through 2012, the most recent year for which survey data were available. Our analysis also does not include data from 2014, which were not available when we conducted our review. The number of participants affected would have been smaller if the $900,000 income limit that went into effect for farm programs in 2014 had applied to crop insurance participants. According to preliminary FSA data, fewer than one-half of 1 percent of farm program participants were found to exceed this limit in 2014. The highest income participants insured more farmland and had more premium subsidies provided on their behalf than other participants from 2009 through 2013. The highest income participants each insured about 490 acres of farmland on average, compared with about 310 acres insured by the other participants. The highest income participants were also associated with larger farms compared with other participants. On average, the highest income participants were associated with policies insuring about 2,920 acres, while other participants were associated with policies insuring about 1,330 acres.also had more premium subsidies provided on their behalf than other participants. Specifically, each of the highest income participants had an average of about $8,500 in premium subsidies provided on their behalf each year, while other participants had an average of about $7,480 each year. Premiums, and hence premium subsidies, are based on the value of the insured crops, and would be greater if more acres were insured and the crop values were higher. In some cases, the highest income participants insured considerably more acres and had considerably more than the average amount of premium subsidies provided on their behalf.