California’s foster care system lends itself to insurance costs

from Kayla MichalovichCalMatters

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An insurance crisis continues to rock California’s foster care system, threatening to displace thousands of vulnerable children.

As of 2024, more than two dozen nonprofits that recruit, train and support foster parents have closed in 13 counties, according to the California Department of Human Services.

Historically, counties have relied on licensed nonprofits known as foster care agencies to place children — especially those who need intensive support — in certified homes until they are adopted or reunited with their biological families.

Their closures come two years after a key insurance carrier pulled out of covering foster care agencies, citing rising legal costs. The company, Nonprofits Insurance Alliance of California, covered roughly 90 percent of the more than 200 foster care agencies operating across the state, leaving them scrambling to find replacements.

No other California insurer has stepped in since, forcing foster care agencies to obtain coverage from out-of-state companies — and sometimes out of the country. In an unregulated market, this means agencies have seen increases of 200 to 400% in their liability coverage. Many reported cost increases of more than $350,000 in annual premiums.

The Legislature last year approved a one-time appropriation of $31.5 million to support agencies as they face unsustainable premiums, but the money has run out. Rep. James Ramos, D-San Bernardino, and Sen. Maria Elena Durazo, D-Los Angeles, recently requested another $30 million in relief funding.

But without any long-term policy solutions, advocates warn that the entire system is at risk of collapse. It will begin by closing some or all of the remaining foster care agencies. Foster parents, deprived of the support they need to support them, could leave the child welfare system altogether, and children would face even more instability, advocates say. And medically fragile children — including children with feeding tubes, developmental disabilities or drug addictions in their mothers — are especially at risk because counties typically lack the resources to provide that level of care.

“It would be an absolute crisis if foster care agencies were to close,” said Diana Boyer, managing director of research and policy at the California Association of Social Welfare Directors. “Foster children are the country’s children. We all collectively need to do more to support them and ensure they have homes and families to go to.”

The crisis is tied to California’s attempts to provide compensation to survivors of sexual assault. Legislation passed in 2019 eliminated the statute of limitations, allowing survivors to sue government agencies. Since then, thousands of lawsuits have been filed and the huge payouts have driven up insurance costs for public agencies everywhere. The schools were among the first to feel the pinch from rising insurance costs to cover liability from the cases.

The nonprofit California Insurance Alliance stopped renewing insurance policies after a $25 million payout to three children after a jury found a Santa Rosa foster care agency failed to protect them from sexual abuse. The band had too made a mostly unsuccessful attempt at reform aspects of California law related to insurance and liability.

“Our Collective Responsibility”

Approximately 300 foster care agencies operate throughout California, providing critical services to approximately 6,500 of the state’s 45,000 foster children.

Counties run many of their child welfare placements through community-based nonprofits because of the quality of their care — especially for children with the highest needs.

If a child is removed from their home in the middle of the night because of abuse or neglect, foster care agencies quickly step in with supportive homes that are “ready,” said Pete Weldy, CEO of the California Alliance for Child and Family Services, which represents roughly 200 foster care agencies in the state.

After initial placement, agencies continue to work with foster families and children to provide ongoing support, including round-the-clock care, crisis assistance and consistent case management.

When an agency closes, a child’s placement can be disrupted.

“That’s one of the untold stories of this whole crisis,” Weldy said. “That may mean the youth has to move to another county, to another foster family. They may be uprooted from their family. They may have to change schools, maybe move communities, lose their friends.” Disruption, he added, can often exacerbate behavioral health needs. “Ultimately, this can lead to the worst outcome, which is for the child to end up without a home,” he added.

If counties can’t find a place, Weldy said the child could end up in a hotel, hospital or conference room.

“It’s the state’s responsibility, and really, therefore, our entire collective responsibility to ensure that these really vulnerable children and young people have what they need to thrive,” he said. “And that’s where foster care agencies do such an amazing job.”

Foster families ‘knew who to turn to’

Sarah and Tony Igmin have fostered 45 children since 2013, when they started working with Angels, a San Diego-based foster care agency that recently closed due to the insurance crisis. During this time period, they worked with three case managers from the agency who would make weekly visits to the child or children they were currently fostering. That consistency has served them and their foster children well, they said.

“We knew who to turn to and how to get support for anything that came up,” Sarah Iagmin said.

They fear the growing number of agency closures will result in more children falling through the cracks and hurting foster parents, especially those who are new to the child welfare system and may need extra support.

“Foster agencies are like AAA and the county is like DMV,” Tony Iagmin said. “They have good workers, but there is a lot of red tape.”

Since Angels closed, the Iagmins began working directly with San Diego County. They said they feel well-prepared to handle the switch because they’ve been foster parents for so long, but they’ll miss the community they’ve found through Angels.

In Placer County, Sarah and Michael Prince have been working with the foster care agency Koinonia Family Services since 2016. After struggling with infertility for over a decade, the couple decided to attend the agency’s orientation.

“I came home buzzing,” Sarah Prince said. “My intuition said, ‘This is my home.’

It took them two years to go through the agency’s certification process. Since then, the couple has taken in 13 foster children, four of whom they eventually adopted.

“I couldn’t have done it without a foster care agency,” Sarah Prince said. “It’s an extra layer of protection for you. They’re your family. When things go wrong, it’s knowing you have someone to call. It’s consistency for those kids who didn’t have consistency because your foster family agency staff doesn’t change.”

Laura Richardson, manager at Koinonia Family Services, said the state agency works with approximately 360 homes, 99 of which are unoccupied. Every day they serve about 200 youth in the homes of their foster families.

According to Richardson, the organization’s insurance has increased 242 percent — from $272,000 to $933,000 a year — since the Nonprofits Insurance Alliance of California stopped renewing its policy. That means they had to revoke their licenses in three cities, transferring those families to other offices that are still operating.

Richardson said they are trying to hold out as long as they can until the state offers a solution. But as more and more agencies close, she worries the homeless population will increase for young people.

“I worry about the departure of the safety net for these most vulnerable young people,” she said. “It’s going to put a strain on other parts of the system. So the state is going to have to pay for it somewhere. I hope we can fix what’s good about what we already have before we lose it.”

Kayla Michalovich is a contributor to California Local News.

This article was originally published on CalMatters and is republished under Creative Commons Attribution-NonCommercial-No Derivatives license.