Early this year, a child care program in southern Maine was dinged for three minor issues during a routine inspection: A refrigerator at the school where the nonprofit operates was a couple of degrees too high. An employee’s paperwork was kept at the wrong location. A first aid kit was missing a pair of tweezers.
After Windham Raymond School Aged Child Care, which runs after-school programs in local schools and has a five-star quality rating with the state, quickly fixed those problems, program director Hannah Marshall didn’t think much of it.
Then, over the summer, she got a notice in the mail from the center’s liability insurance company that it was dropping the center’s policy. Even though the center’s licensing and accreditation were never at stake, the insurer said it would no longer cover the program.
“Immediately I offered to get a letter of good standing from licensing, because we are in good standing,” Marshall said. “What we heard from our broker is that they were looking for reasons to drop child care programs.”
Child care providers across the country are reporting higher liability insurance costs, reduced coverage and policies being dropped altogether. Liability insurance, which typically protects child care providers from lawsuits related to injuries and accidents, is required for traditional child care centers in 30 states.
A survey of more than 1,100 child care providers from 49 states and Washington, D.C., released in August by the National Association for the Education of Young Children found that about 80 percent had seen their liability insurance costs go up in the last year. The issue has ballooned into a crisis for child care centers, which already operate on thin profit margins. When centers have to pay more for insurance, parents have to pay higher tuition, said Heather Marden, co-executive director of the Maine Association for the Education of Young Children.
“Families cannot bear this financial burden being passed on to their child care costs,” Marden said. “That’s why from our lens as an organization, we talk about child care needing to be invested in more heavily as a public good so that these businesses are not being shut down every time pricing fluctuates.”
Marshall struggled to find another liability insurer for Windham Raymond School Aged Child Care. She ended up purchasing a third-party insurance program that would cover the center for about 25 percent more than she was previously paying – more than $11,000 a year, up from about $8,500.
“It does feel like we’re doing everything we possibly can to set up a quality program, and yet still for liability insurance, it’s not good enough,” Marshall said.
Last year, about 80 child care providers from the Philadelphia area convened a town hall meeting to discuss challenges facing the industry. Leslie Spina, who runs a small group of child care centers in the city called Kinder Academy, said everyone wanted to talk about problems with their insurance.
Before the meeting, Spina learned the cost of her own liability insurance was jumping by 45 percent. When she asked the group at the end of the town hall if anyone else had experienced this, “the crowd went wild,” Spina said. Nearly everyone else there reported also getting hit with insurance price hikes.
Spina later got calls from providers who hadn’t attended but wanted to share their own rising premiums, which they said ranged from 30 percent to 300 percent more than their previous rates.
“It was really quite shocking,” Spina said.
Insurance costs are rapidly rising across other sectors, too. Nationally, home and auto insurance prices have swelled since the pandemic. Compounding the problem for child care centers, however, is a lack of options: It’s become increasingly difficult to find companies willing to provide liability insurance for child care, said Sam Phillips, a Texas-based insurance agent who has about 300 child care clients across the country.
The struggle to find, and keep, affordable insurance has strained an industry already scrambling to stay afloat after federal stabilization funding, which buoyed child care centers during the pandemic, expired last fall.
Now, maintaining insurance has become a crisis in itself, Phillips said.
“They already have such a little profit margin as is, so when they’re hit with premium increases this large, a lot of people are operating at a loss right now.” Phillips said. “We have a lot of people that are really considering closing because it’s too risky to operate without insurance in this industry.”
In previous years, Phillips said, she had no trouble finding insurance policies that covered up to $1 million in abuse claims for her child care clients. Now, if insurance companies offer child care policies at all, they often don’t cover abuse. When they do, she said, coverage is typically capped somewhere between $100,000 and $300,000 for claims.
Phillips knows of seven national companies that insure centers for liability, but she said some have limits on program size, restrict the states in which they insure clients or recently stopped accepting new clients.
“We’re lucky if we have three options for each [child care] program, because you have to fit the boxes they want you to check,” Phillips said.
Some of the policies are highly restrictive in what they cover, particularly if child care providers have any past violations or claims. Phillips said she knows of one policy that excludes abuse and molestation, professional liability (such as if a teacher were to serve a child the wrong breast milk or food they are allergic to), accidents involving playground equipment, incidents that occur when entering or exiting a vehicle, field trips and accidents involving inflatables or water.
“We have a lot of owners that are being forced into that policy because no other insurance company will entertain them,” Phillips said. “It’s like, we’ll insure child care — we’re not going to cover anything that might happen to an actual child care center, but here’s your coverage.” And those barebones policies can end up costing five times more than previous policies, she said.
Some of her clients have been dropped for bureaucratic reasons, such as filing paperwork past a deadline. When more serious claims have been filed against centers — for injuries or abuse — she’s seen insurance companies settle with families before fully investigating whether the incident actually happened. And if a center has an open claim, whether true or not, it is almost impossible to find a company that will insure it.
Some insurance companies have told providers the reason they are pulling out of the child care market is because it has become costly to insure programs. One insurance company told Phillips that the number of claims filed against child care providers has gone up, as have the resulting payouts, increasing the perceived risk from the insurer’s perspective. And child abuse claims, in particular, are costly to litigate or settle.
Even for centers that do everything right, Phillips said she has seen insurance premiums go up by tens of thousands of dollars a year.
For Jen Vachon, the Parkside Child Learning Center in Bangor, Maine, has felt like a home. It’s where her daughter grew up and where Vachon has worked for 14 years. Although enrollment dropped last year, Vachon’s insurance costs rose 18 percent — the highest increase she had experienced since she bought the business six years ago — from $1,195 to $1,410 annually.
The increase of even a couple hundred dollars rattled Vachon, who has also dealt with challenges in staffing and fluctuating enrollment since the pandemic. Her margins are so tight that she worries if premiums continue to rise in coming years, she’ll have to close the center.
“I thought to myself, this is my last year. I’m not going to do it again if we can’t figure out how to financially support it. It’s a really hard place to be in,” Vachon said.
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For in-home child care providers, who often aren’t required to have liability insurance to operate, it can come down to an impossible choice: Pay for the rising insurance costs with money you don’t have, or risk operating without it, said Jessica Sager, CEO of All Our Kin, a nonprofit that advocates for family and home-based child care providers.
“I do think it’s even harder for family child care educators because their margins are even narrower than that of centers,” Sager said. “Often they’re making tradeoffs about how much money they pay themselves versus whether they cover that liability insurance payment.”
Nearly one-quarter of family child care providers who responded to a survey this fall from the National Association for Family Child Care said liability insurance was a top concern for them.
Neither child care experts nor the centers themselves recommend ditching liability insurance. Maine, where Vachon’s center is located, requires it for child care providers to operate. Liability insurance is also required in Pennsylvania, where Spina runs her center. Spina doesn’t know any providers who would risk operating a center without insurance.
“It’s not OK for children to get hurt. We should intervene as best we can,” Spina said. “We should have standards that ensure that children are safe and well cared for. But the reason we have liability insurance is that sometimes accidents happen.”
Contact staff writer Ariel Gilreath at (212) 678-3639 or gilreath@hechingerreport.org.
This story about child care insurance was produced by The Hechinger Report, a nonprofit, independent news organization focused on inequality and innovation in education. Sign up for the Hechinger newsletter.
The post Surging insurance costs are threatening the future of child care appeared first on The Hechinger Report.
Early this year, a child care program in southern Maine was dinged for three minor issues during a routine inspection: A refrigerator at the school where the nonprofit operates was a couple of degrees too high. An employee’s paperwork was kept at the wrong location. A first aid kit was missing a pair of tweezers.
The post Surging insurance costs are threatening the future of child care appeared first on The Hechinger Report. Early Education, Child Care The Hechinger Report
