Premium subsidies increase on SCO, ECO plans

Glad tidings and Happy New Year!

We’re going to review a subject matter I last covered in July 2021, the Enhanced Coverage Option (ECO), due to recent, increased premium subsidies for the coming year for both ECO and the Supplemental Coverage Option (SCO). 

SCO and ECO are coverage options that provide the insured with “shallow loss” coverage on a countywide basis. Both coverage options can provide additional coverage for the portion of your underlying crop insurance deductible, which is based upon each county’s expected wheat revenue and the expected wheat yield as established by the Risk Management Agency (RMA). Additionally, both SCO and ECO plans mirror the underlying multiperil crop insurance (MPCI) coverage, i.e. revenue protection or yield protection. 

SCO provides coverage on top of the underlying MPCI coverage to a maximum of 86%. For example, if an insured chooses 80% revenue protection, an SCO policy would provide coverage from 80% to 86%.

ECO offers coverage up to 90% or 95% trigger levels from 86%. An insured could choose coverage to 90% or 95%, the percentage of expected yield or revenue when a loss becomes payable.

Higher coverage levels will trigger more frequent losses; naturally, producer/insured premiums will reflect such. The premiums for SCO and ECO are directly related to the Projected Harvest Price Volatility Factor determined and set by RMA during the Aug. 15 through Sept. 15 price discovery period. Not coincidentally, the higher the volatility factor, the higher the premium costs for both the underlying revenue protection and SCO/ECO policies. Remember that the harvest price discovery period is the August-September preceding harvest of the following summer. 

SCO subsidies have increased from 65% to 80% for the 2026 crop year. ECO premium subsidies have nearly doubled in the last two years, 44% in 2024, and are now set at an 80% premium subsidy for all coverage levels by the U.S. Department of Agriculture (USDA). For this very reason, I believe this will be the means of providing future, shallow loss coverage by USDA, eliminating the need for ad-hoc monies to growers.

For those who’ve desired to have higher coverage levels made available, this is it! Remember, this is not individual coverage per se, rather coverage that is based upon your individual policy liability but is an area coverage plan and only triggers if the revenue or yield for the county falls below 95%. Please feel free to contact me regarding any additional questions you may have.

Curtis Evanenko serves as a risk management advisor with McGregor Risk Management Services. He can be reached at (509) 540-2632 or by email at cevanenko@mcgregorrisk.com.