The foster care system in California is facing significant challenges due to skyrocketing liability insurance costs, which have forced many foster family agencies (FFAs) to close. These non-profits, crucial for recruiting and supporting foster families, are now facing premiums that have increased from $300,000 a year to over a million dollars.
The Impact on Children
At least 19 FFAs in California have shut down since the Nonprofits Insurance Alliance of California (NIAC) exited the market last year, unable to continue providing coverage due to unsustainable financial losses. This has left nearly 1,800 children in LA County alone without the support they need, potentially leading some families to stop fostering altogether.
Nationwide Problem
The issue extends beyond California, affecting states like Illinois, Florida, Pennsylvania, Nebraska, and New York. In Illinois, some foster care nonprofits have seen their premiums increase by over 2,000%, with one agency paying over 1millionannuallycomparedto45,000 just a few years ago.
- The Center for Youth and Family Solutions in Illinois now pays over $1 million for liability insurance.
- Other sectors such as elder care, mental health, and addiction treatment are also reporting similar issues.
The Broader Implications
Experts suggest that the changing landscape of liability insurance could be a sign of broader trends affecting businesses across various sectors. Factors like inflation, higher legal awards, and increased claim costs contribute to rising premiums, making it almost unmanageable for nonprofits in high-risk areas.
Can Insurers Just Leave?
Insurers can opt not to renew policies after contracts expire, though state insurance departments have limited power to intervene. However, insurers cannot cancel policies mid-term unless there’s fraud or nonpayment. Despite regulations on rate hikes, increases are often approved, putting small agencies with tight budgets at risk.
State Responses and Potential Solutions
However, this is considered insufficient by many agencies. Illinois lawmakers propose liability caps to protect nonprofits, but critics argue this could deny justice to abuse survivors.
- Creating public insurance pools for high-risk nonprofits
- Federal solutions including shared-risk insurance pools, federal programs, or subsidies
The Human Cost
When FFAs close, children are returned to county child welfare departments, where already overloaded employees struggle to provide adequate care. Foster families lose access to specialized services, and nonprofit workers face increased stress and workload, leading to layoffs and program cuts.
Where Do We Go From Here?
The ongoing crisis highlights the urgent need to balance accountability for abuse survivors with the financial realities faced by nonprofits. Ensuring the sustainability of agencies that support vulnerable populations remains a critical challenge for policymakers, insurers, and society at large.
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