Last year, Youth Services Insider reported on the fact that the Nonprofits Insurance Alliance of California, or NIAC — the liability insurer for most of California’s nonprofit foster care providers — had announced it would not be renewing its clients in the space, leaving hundreds of organizations in need of new coverage. At the time, many feared that might create a crisis situation where hundreds of foster care providers, known as foster family agencies (FFAs) for thousands of California children would have to abruptly shut their doors.
As Marijke Rowland recently reported for The Intersection, some did. But many were able to survive by obtaining out-of-market insurance at far higher rates, which many providers say are not tenable for long. Some findings from a recent survey of FFAs:
-10 have closed their doors
-Liability insurance costs have increased by an annual average of $163,484 from the previous year.
-60% of FFAs in the survey reported that they will not be able to sustain the higher costs of insurance by their next renewal date, with 33% projecting that their FFA will be at risk of closing entirely, and 27% will be at risk of reducing capacity.
Last year there was a legislative push to actually change the regulations around lawsuits against FFAs; NIAC announced its exit from the market after that went nowhere. This year, there appears to be some hope for a temporary bailout that would surge additional money to foster family agencies to help them absorb the increased insurance premiums.
Gov. Gavin Newsom did not include any such funds in his original budget, but the Legislature has included $31.5 million to help FFAs in its proposal, opening the door to some potential relief. The bill describes it as “bridge funding … to prevent agency closures.”
Newsom has since agreed to the inclusion of these funds. This essentially buys another year for market forces to drive down the cost of insurance rates, or for the state to attract new insurance providers willing to play in the foster care space and make it more competitive, also lowering the cost.
Absent one of those two things happening, it’s hard to see how this isn’t a bridge to nowhere. The legislative proposal notes that it involves “matching federal funds,” so it appears they think this surge to FFAs can be done in line with Title IV-E dollars.
“This prudent investment by the administration and Legislature has given us the time we need,” said California Alliance of Child and Family Services’ CEO Pete Weldy, in a statement. “Now we must make sure we don’t waste it.”
Meanwhile, the state Department of Insurance recently took a step to enable FFAs to find out-of-market providers without as much red tape, which makes sense given that a plea from the department last year for more California insurers to take this on fell largely on deaf ears.
This article was updated on Wednesday, June 25.