Private foster agencies look to the state to offset rising insurance costs

Private foster agencies are seeking $47 million through the state budget process after their primary insurer decided to stop covering them last fall.

In August, the Nonprofit Insurance Alliance, which insured 90 percent of the 220 private foster agencies in California, announced that it would not renew coverage of the organizations.

Private foster agencies, known as foster family agencies or FFAs in California, are nonprofits that recruit and oversee foster families. They currently house about 7,400 of California’s roughly 60,000 foster kids, slightly more than 12 percent.

The alliance’s decision to drop private foster agencies came after it had tried to get a bill through the legislature last year to change how the agencies 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 – which is what the alliance did in an abuse case and a jury subsequently issued a $24.8 million judgement against a foster agency.

When the bill was amended in the Senate Judiciary Committee in July to remove the language the alliance wanted, it responded by announcing the non-renewals. The alliance’s president and CEO said in a statement that without the changes it had requested private foster agencies in California were “uninsurable.”

The alliance’s decision has thrown California’s child welfare system into a crisis because it’s come to rely on private foster agencies. Foster care is typically seen as the sole purview of government, but that’s not the case in America today. While only governments have the authority to remove abused or neglected children from their homes, in California and across the nation both governments and private organizations now recruit and oversee foster homes.

In fact, private foster agencies exist because the government-run foster care system is often underfunded, making private recruiting agencies a necessity to meet the need. Deep mistrust of government in some circles also plays a role. Becoming a foster parent requires answering a lot of invasive questions during the screening process, and some would-be foster parents are simply more comfortable with a private organization asking those probing questions.

The California Alliance of Child and Family Services, an organization representing foster family agencies, recruited Assemblyman James Ramos (D-Highland) to request $47 million in bridge funding over two years to stabilize the state’s private foster agencies.

Foster care is typically seen as the sole purview of government, but that’s not the case in America today.

In a March 3 letter to Assemblyman Corey Jackson (D-Perris) the chairman of Assembly Budget Subcommittee No. 2 on Human Services, Ramos wrote that while foster family agencies “serve 1 in 5 foster youth in California” they are “at risk of closing and downsizing due to the insurance crisis and recent budget cuts.”

Ramos said Insurance Commissioner Ricardo Lara called for “admitted insurers to step up and offer FFAs coverage” in the wake of the Nonprofit Insurance Alliance’s decision to drop the agencies, but “not a single state-admitted insurer has stepped up.” He added that while non-admitted state insurers are willing to offer liability to coverage for private foster agencies in California, the costs are “significantly higher” for “often lower levels of coverage, making them an unsustainable long-term solution for agencies.”

The assemblyman also cited the results of a survey of 36 foster family agencies conducted by California Alliance of Child and Family Services and the California Department of Social Services. Twenty-eight of the respondents reported that their liability insurance costs have risen 139 percent while nearly a third said “they would not be able to afford these insurance costs by next year and will be at risk of closure,” Ramos wrote.

Ramos told Jackson that $36.1 million of the requested $47 million would be used to offset private foster agencies’ higher insurance costs. The remaining $10.6 million would go towards increasing state payments to the private agencies until a new rate structure is implemented in 2027. Ramos wrote that those payments would be used to “increase social worker salaries and operation agency costs to maintain the quality of care and placement stability for youth.”

Adrienne Shilton, the vice president of public policy and strategy for the California Alliance of Child and Family Services, says the $47 million request has “definitely” captured “the attention of the Legislature,” which is becoming educated on the situation. Since the fall, she says seven foster family programs within the state have closed, representing “a concerning trend.”

“While it’s a small number,” Shilton says, “it’s still lives that are being impacted.”

Shilton said foster family agencies provide an “essential safety net” for foster children with higher needs as well as for the foster families who care for them. As private agencies disappear,

California counties will be asked to absorb these children into their existing child welfare systems, which could prove challenging given the children’s needs and county limitations.

“Our big question,” Shilton says, “is what is going to happen to these kids and families.”

(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.)