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RMA Should Change the Rules on Its Ineligible List

By Kenneth D. Ackerman

The U.S. Department of Agriculture’s (USDA) National Appeals Division (NAD) is a great forum for farmers who have disputes with USDA agencies, and want to address them quickly and inexpensively. I often advise farmers that NAD is the best option to obtain a fair, neutral ruling on their situation from a hearing officer who specializes in USDA programs, is independent from program agencies, and is mandated to follow the rules.    But of all the cases where I’ve assisted farmers in front of the NAD — mostly involving crop insurance or farm programs — one single issue has proven the most frustrating for farmers and NAD hearing officers alike: the “ineligible list” maintained by USDA’s Risk Management Agency (RMA).

When it works right, RMA’s ineligible list is a good, well-managed system designed to protect the integrity of Federal crop insurance by insuring farmers pay their debts on time.  (Full Disclosure: I approved the original rules for the program myself when I was RMA Administrator back in the 1990s.)  If a farmer has a debt, usually a late or unpaid premium on an insurance policy, and fails to pay by the final deadline, he or she is placed on the list, and immediately deemed ineligible for insurance coverage and other USDA programs – even if the ruling comes in the middle of a growing season.

On paper, RMA rules seem to give farmers plenty of protections before declaring them ineligible.  Farmers must receive notice, a meaningful chance to pay or contest the debt, and a right to appeal to NAD.  But once these steps occur, the system is automatic.  Neither the agency, the insurance company, nor even NAD itself has discretion to reverse the process, no matter how sympathetic the case.  RMA’s basic crop insurance policy is explicit in saying that no excuses are allowed: “Failure to timely pay because of illness, bad weather, or other such extenuating circumstances is not grounds for reinstatement in the current year.”  See FCIC Basic Provisions, section 2(f)(2)(iii)

This is where the trouble has evolved.  Today, cases involving RMA’s “ineligible list” dominate RMA’s docket before NAD, representing 80 out of 83 decisions just between May and September 2012.  The farmer loses almost every time.  And increasingly, hearing officers despair their inability to avoid hardship, even in cases where nobody suggests any bad faith on the part of the farmer.  Farmers find themselves trapped on the list over minor problems such as clerical mistakes, a family illness, a problem at the post office, language barriers, a check mistakenly mailed a few days late, or a notice sent to a wrong address.  The impact — cutting off a farmer’s insurance mid-way through a loss year — can be devastating.

Not surprisingly, in not less than twenty of the posted NAD decisions on the “ineligible list” in 2012, the hearing officer felt obliged to express “sympathy” or “empathy” with the farmer’s dilemma before finding he or she had no basis to correct the harm.

Just among the recent cases, we have seen farmers lose coverage, for instance, because:

  • The farmer mailed his premium payment on time, but his rural post office had a practice of transferring its mail to a larger city before stamping the  postmark, resulting in the payment being postmarked as a few days late (NAD Case 2012E695);
  • A farmer had agreed to an installment plan to pay off his insurance premium and he mailed all four of his $1,000 payments on time, but accidentally left off the $145.90 in interest on the final check.  Quickly noticing the mistake, he paid the interest about two weeks later (NAD Case 2012E000715);
  • A farmer was mistakenly told by his insurance agent that he needed to pay his premium bill by December 30 rather than the actual deadline of November 30. The agent then went on vacation and was unable to correct himself.  The farmer paid his premium on December 8 (NAD Case 2012W000187);
  • A farmer had paid off more than 90 percent of the debt he owed to his insurance company, but then was in a car accident prior to the final payment date and, while he and his wife were in the hospital, their teenage daughter, who was helping out, mailed the final check four days late (NAD Case 2012E000483 – upheld on National Director Review);
  • A farmer had suffered crop losses and was owed indemnity payments easily large enough to off-set the premium he owed on the policy, but his insurance company was slow finalizing the claim resulting in missing the deadline.

These types of petty glitches are not what the “ineligible list” was designed to prevent, and should not be the reason for a hard-working, proven farmer with a good track record to face bankruptcy or lose his business.

There is a way to fix this problem.  I think RMA should change its rules to allow one person, the NAD National Director, to provide equitable relief in “ineligible list” cases, but only in cases that reach a National Director’s Review, only where the farmer affirmatively shows a good faith effort to pay the debt, and only where RMA agrees that providing relief would not weaken its oversight system.  Perhaps an appropriate “late fee” should be considered as well. Limiting discretion to cases on appeal would weed out the frivolous ones. It would mean that a hearing officer must first develop a factual record supporting the “good faith” finding, that RMA would have the chance to weigh in, and that RMA would not be placed in the position of seeming to “bend the rules” in sympathetic cases.

RMA would have to amend its regulations to make this change, but it seems well worth the effort. The ineligible list, a sound system for protecting program integrity, should not be allowed to become a “gotcha”-style trap for well meaning farmers.

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