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What is Enhanced Coverage Option ECO
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The Enhanced Coverage Option (ECO) is a new supplemental insurance program that will be available in 2021. ECO is an option that can only be added to an underlying individual plan of insurance and provides area-based coverage similar to the Supplemental Coverage Option (SCO). This article outlines ECO and provides some coverage examples. • Overview of ECO • ECO will be available for purchase on 31 spring-planted crops including corn, soybeans, and wheat (RMA 2020a and 2020b). ECO is purchased as an endorsement to an eligible individual insurance plan such as Revenue Protection (RP), Revenue Protection with the Harvest Price Exclusion (RP-HPE), or Yield Protection (YP). It cannot be used with an underlying area plan of insurance (i.e. Area Risk Protection Insurance (APRI) or Margin Protection). ECO mimics coverage type of the underlying product. For example, ECO provides county yield coverage when purchased with YP and county revenue coverage when purchased with RP or RP-HPE. • ECO operates in a similar manner to SCO. ECO can be purchased at either a 95% or 90% coverage level. Coverage extends from the selected level down to 86%, the point where SCO begins to offer coverage. SCO will provide coverage from 86% to the coverage level of the underlying RP, RP-HPE, or YP policy. Producers do not have to purchase both. A producer could purchase ECO and not SCO, and vice versa. In contrast to SCO, individuals are eligible to purchase ECO regardless of the farm commodity program (ARC/PLC) in place for the insured acres. SCO can be only be purchased on acres on which PLC is chosen. • Producers will be required to pay a premium for ECO coverage. ECO premiums will be subsidized at a rate of 44 percent when combined with revenue coverage and 51 percent when combined with yield coverage. Note that both subsidy rates are below the 65 percent rate for SCO premiums, and lower than the subsidy rates for individual products using enterprise units. • Conceptually, ECO is intended to offer producers an option to purchase additional coverage for a portion of their insurance deductible as shown in figure 1. However, since ECO uses a county-based trigger, ECO could result in indemnities being paid when individual losses are not realized. Similarly, individual losses could be triggered without leading to an ECO indemnity payment. Choosing 90% ECO covers 4% of the insurance deductible, while 95% ECO covers 9% of deductible value. SCO can then also be used for county-based coverage from 86% down to the coverage level of the individual plan elected. • For more information see the following farmdocDAILY articles: • The New Enhanced Coverage Option (ECO) Crop Insurance Program • https://farmdocdaily.illinois.edu/202... • Other ECO articles • https://farmdocdaily.illinois.edu/?s=...
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