Insurance crisis has private foster agencies struggling to stay afloat

Left in limbo by the Legislature and Gov. Gavin Newsom, California’s private foster agencies say they’re struggling to stay afloat until the new year, when they hope a new governor will help them navigate an ongoing insurance crisis that threatens their existence.

Private foster agencies, known as foster family agencies or FFAs in California, are a critical but frequently overlooked component of the state’s child welfare system. These nonprofits vet, recruit and oversee foster families for counties that often don’t have much staff or resources to devote to child protective services.

Some also believe FFAs may be more effective than government agencies at recruiting foster families because they’re private organizations, which may be an advantage when approaching certain communities wary of the government.

An insurance crisis
Since August 2024, the state’s approximately 220 FFAs have been perpetually on the hunt for insurance coverage after the Nonprofit Insurance Alliance, which had insured 90 percent of the private agencies in the state, announced it wouldn’t renew its policies.

The alliance decided to drop FFAs after it gambled on a court case and lost big. The insurance carrier rejected settlement offers in a sexual abuse case involving one of its FFA clients, Alternative Family Services of Northern California. The case went to trial, and a jury issued a nearly $25 million judgement against the FFA and the alliance in December 2023.

The following year, it tried to get a bill through the Legislature to change how FFAs were held liable for negligence. According to some interpretations of the language, the bill would have made it impossible for private foster agencies to sue their insurance companies if the insurer failed to accept a legal settlement.

When that bill failed, the alliance got out of the FFA market, sending the nonprofits into a crisis. Because of their potential legal liabilities, insurance companies are hesitant to cover FFAs, many of which are cash-strapped to begin with.

Since the Nonprofit Insurance Alliance dropped FFAs, 29 of the agencies in 13 counties have closed their doors, according to the California Department of Social Services. Those FFAs served 439 foster homes, of which 259 had active placements.

All of the homes were transferred to other FFAs or to counties, except for one home whose approval was rescinded and 11 homes whose approvals were surrendered.

The department says no child placements have been disrupted by FFA closures so far.

Temporary assistance 
In 2025, an organization representing FFAs, the California Alliance of Child and Family Services, helped secure $31.5 million in the state budget to assist the struggling organizations. The CA Alliance tried to get another $30 million in bridge funding allocated to FFAs during this year’s budget negotiations but failed.

At a June 30 hearing of the Assembly Human Services Committee, Claire Ramsey, chief deputy director of the Department of Social Services, said that the bridge funding from 2025 seems “to have substantially slowed the number” of FFA closures.

But with time ticking down on Newsom’s tenure, the current administration appears to have washed its hands of the FFA insurance crisis, kicking the can to the next governor.

That leaves FFAs hanging by a thread for the time being.

Five-and-a-half million dollars remain from the 2025 bridge funding. Adrienne Shilton, the vice president of public policy and strategy for the CA Alliance, said last week her organization is still trying to get clarity from the state on how the allocation will go.

“We’d like to get this funding out, or at least the application out, in September,” Shilton said.

Not enough
But even if that happens, she said those funds will not be enough to stop more FFAs from closing.

“What are they thinking is going to happen?” Shilton said. “We’re going to lose these agencies. I don’t know how much more clearly we can say that. More agencies are going to close.”

So far, when FFAs have closed, the children in their care have been ported to other FFAs. But at some point, Shilton said, the remaining FFAs in California won’t be able to take on additional children.

“We’re going to lose these agencies. I don’t know how much more clearly we can say that. More agencies are going to close.”

When that happens, the remaining children will have to be ported to foster families overseen solely by county welfare services. Those families typically don’t receive the same level of support as foster families overseen by FFAs.

“Is the county able to provide the same level of support as the FFA was?” Shilton asked. That, she said, “is the million-dollar question.”

Silence from above
Amanda Kirchner, director of legislative advocacy of the County Welfare Directors Association of California, agreed that FFAs play an important role in providing foster children the level of care they need.

“FFAs are a critical component of our child welfare system,” she said. “They’re key partners with child placement and services. We want to see that they have every opportunity to continue their work in California.”

Capitol Weekly reached out to Ramsey for comment but instead got a statement back from  Department of Social Services’ spokesperson Jason Montiel.

“The Department continues to work closely with counties, providers, and other stakeholders to explore potential solutions to ensure that FFAs can continue providing these critical services,” Montiel said. “The Department is in contact with FFAs across the state to monitor for unmet needs, potential closures, and to provide technical assistance.”

He also said that the department “will continue to accept requests from FFAs until all” of the remaining bridge funding from 2025 is used “or until June 30, 2027, whichever comes first.”

The governor’s office did not respond to a request for comment. Also not responding: the gubernatorial campaigns for Xavier Becerra and Steve Hilton as well as the campaigns for insurance commissioner candidates Ben Allen and Jane Kim.

Their silence speaks to why FFAs feel like they’re out on a limb alone.

“We’re at a loss about why aren’t we seeing more support,” Shilton said. “The clock is ticking.”

(Editor’s note: Capitol Weekly reporter Brian Joseph previously spent more than a year investigating privatized foster care during a fellowship at the University of California, Berkeley. The results of that investigation were published in a 2015 story in Mother Jones magazine that you can read here.)