RH News | Archive

Efficiency – The proposed rule states: “only a portion of the approved insurance provider’s monetary savings can come from a reduction in compensation….” Portion is not defined by the regulation. We suggest a reasonable number is 50% and urge RMA to revise the definition accordingly.

Profit sharing arrangements – We suggest adding an additional sentence at the end of the definition, to read, “So long as the requirement of the previous sentence is met, additional restrictions or conditions on such payments may be imposed.”

Third party administrator (TPA) – is defined at the end of the section to mean “….or any other type of relationship.” This definition is overly broad and as a result useless. We suggest RMA either state what it means or drop the un-definable.

Underwriting gain – is defined to include “… and any costs incurred by the approved insurance provider in excess of the A&O subsidy related to the delivery, loss adjustment and administration of the Federal crop insurance program.” Since section 400.716 (h) requires a company to operate in the black in order to qualify for a PRP and section 400.719 (a)(6) excludes underwriting gains from the efficiency calculation, the definition as proposed could be read to allow a company to “define” an operating loss as an underwriting gain and thereby qualify for a PRP when it should not be able to do so.

Section 400.714(a) – This section indicates that, for the 2006 reinsurance year, revised plans of operations for premium reduction plans must be received by RMA by not later than 15 days after the publication of the final rule. We strongly object to this timeframe for numerous reasons. For the 2006 reinsurance year, it is likely, based on past history, that SRA plans of operation will not all be approved before the timeframe specified in this section for revised plans of operation. Furthering this argument, all parts of the 2006 plans of operation are not even due to RMA until May 1, 2005. Thus, there will be great confusion and a likely further delay in approval of 2006 plans of operation if revised plans for PRP are due and submitted even before the basic plans are approved. Further, the proposed short time period for 2006 of 15 days after publication of a final rule simply does not allow enough time for proper preparation of PRP plans, nor for training and implementation to occur. Finally, given the likely disruptive and chaotic marketplace reaction and transfer of policies that will follow the submission of even one PRP plan, it is not advisable to implement PRP provisions in the middle of a crop year, which would result in a single policyholder possibly having PRP discount reasons to insure spring crops with a different agent or company than fall crops. Clearly, there is not enough time to adequately implement PRP for the 2006 reinsurance year, and if it is to be implemented at all, implementation should be delayed until 2007.

Section 400.715(c) – Limitations and Prohibitions: This section states that the amount of the premium reduction offered based on the percentage of the net book premium may not vary between states, crops, coverage levels, policies or plans of insurance, or on any other basis. It is our understanding that RMA has considered allowing varying amounts of PRP by state. Thus, if variations by state are acceptable, this section must be revised.

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