This Note explores the current liability insurance crisis unfolding within privatized child welfare systems across the United States. The primary argument is that the roots of the crisis lie in the combination of a lack of funding for services leading to harm to children, large lawsuit settlements burdening contractors alone due to state sovereign immunity, and skyrocketing insurance premiums, making it impossible for state and local agencies to contract out services. To mitigate the ongoing insurance crisis and protect contractors while still leaving remedies available for injured parties, this Note recommends that the federal government create a new discretionary grant under the Child Abuse Prevention and Treatment Act (CAPTA) Discretionary Funds Program to specifically allocate funds to privatized child welfare systems. In return for these jurisdictions proposing innovative solutions to improve child safety and retain quality contractors, awardees will be compensated with additional funds to cover both the proposed programming as well as to start a statewide risk pool to mitigate the insurance issues.
In the words of Philadelphia Councilmember Cindy Bass, “Where are the alarm bells that should be ringing? This is of great concern, isn’t it?” In 2013, Philadelphia’s child welfare system underwent a massive change; the transformative effort, entitled “Improving Outcomes for Children,” created a partially privatized system, outsourcing part of Philadelphia’s Department of Human Services’ (DHS) case management responsibilities to ten private nonprofit organizations. Under the new system, DHS handles child abuse and neglect investigations and is responsible for initially integrating children into the system. After that stage, DHS procures contractors to whom the case management and direct services responsibilities shift. However, any major changes in placement or case planning for a child require final approval from DHS due to their continued oversight role in the case management process. The city’s procurement of these services is broken down geographically into ten Community Umbrella Agencies (CUAs) Districts, each assigned to a contractor.
For several years, Turning Points for Children (TPFC) acted as Philadelphia’s largest child welfare contractor, having been awarded four out of the ten CUAs and serving over 3,000 children and family members involved in the city’s foster care system. However, in August 2023, TPFC was forced to give up their government contracts and abandon their thousands of vulnerable clients. How could the city and its contractors let this happen to such a vulnerable population? It comes down to a failure of the city’s government procurement system.
Even with the eyes of both contractor and DHS caseworkers on any given case, high caseloads and the nature of being human mean that mistakes do happen, and children are neglected by the system. Due to DHS’s status as a government agency, which generally grants them sovereign immunity from lawsuits, the burden of any litigation resulting from such harm falls entirely on the contractors. In 2021, TPFC entered into a $6 million settlement with a family whose daughters had been harmed by caseworkers’ failure to remove them from their father’s home. DHS’s sovereign immunity meant that the entire financial burden of the error fell squarely on TPFC’s shoulders, increasing vulnerability for TPFC and the children that they serve.
Philadelphia, like most jurisdictions procuring contracted work, requires contractors to obtain liability insurance in order to be awarded contracts. But following several lawsuits with multi-million-dollar settlements, TPFC’s liability insurance provider grew tired of providing payouts, and premiums skyrocketed, increasing by ninety-eight percent between 2017 and 2020. The newly escalated premiums provided a difficult choice for contractors who could not afford to both pay for the requisite liability insurance and continue to fund their actual operations. In August 2023, the burden became insurmountable, and TPFC gave up its four CUA contracts, leaving over 3,000 children temporarily without access to services. Given that Philadelphia’s other available child welfare contractors are wrestling with the same insurance issues, the city has struggled to effectively contract out these vital services.
On the one hand, while some states dealing with these dilemmas have extended immunity to their contractors, that solution often leaves children and families who have been harmed by the system without a remedy for its failures. On the other hand, while systems like Philadelphia’s do provide an avenue for remedy, their contractors are forced into untenable financial positions which ultimately leave the jurisdiction without contractors, or anyone else, to provide the necessary services. Without a solution, more contractors will be forced to abandon their contracts, leaving our most vulnerable population without adequate services to support them.
This Note addresses the balance between leaving a remedy available for children and families harmed by the child welfare system, while still allowing the system to operate effectively. To understand these issues, it is crucial to delve into the history of the child welfare system, the diversion between public and private child welfare operations, and discuss the issues that sovereign immunity and skyrocketing insurance premiums pose to the system. Ultimately, this Note recommends federal intervention via a new discretionary grant for privatized jurisdictions that aims to both calm the child welfare insurance industry while also examining novel improvements to child safety outcomes.
Part I provides a brief history of child welfare in the United States and an overview of how the federal government regulates the modern-day system. Part II includes an examination of the differences between public and private child welfare systems, and a description of the burden that sovereign immunity places on privatized systems. Part III conducts an analysis of existing programs implemented by states to attempt to combat these issues. Finally, Part IV offers a recommendation on how the federal government may step in to help remedy these system failures, ultimately suggesting that the federal government implement a specialized discretionary grant program for privatized systems that will alleviate these issues.
Before the United States even gained its independence as a nation, legal protections were in place for children. However, early forms of child protection were largely operated by private entities and were more heavily focused on issues like infant mortality, rather than child abuse or neglect. The federal government first dipped its toes into child welfare in 1909 when President Theodore “Teddy” Roosevelt implemented the White House Conference on the Care of Dependent Children, which resulted in a recommendation that the federal government establish a “Children’s Bureau” to oversee the welfare of infants and children throughout the United States. In President William Howard Taft’s endorsement speech for the legislation that would create the Children’s Bureau, he postulated that “if . . . we can establish a department for [agriculture], it does not seem to be a long step or a stretch of logic to say we have the power to spend the money on a Bureau of Research to tell how we may develop good men and women.” The federal government’s power to intervene in the protection and welfare of children was solidified with the 1912 passage and signing of the Children’s Bureau Act.
In the first several decades of its existence, the Children’s Bureau was focused on researching causes and preventions of infant mortality, which was an issue of major concern in the United States at that time. The federal government’s first step into child welfare legislation was followed not long after by the Sheppard-Towner Maternity and Infancy Protection Act passed in 1921, which allocated federal money to the states for the purpose of educating its citizens “about prenatal health and infant welfare.” The relationship between federal and state governments regarding child welfare was further expanded with the passage of the Social Services Act of 1935, authorizing the Children’s Bureau to work with state health and welfare agencies in establishing and strengthening services for the protection of “homeless, dependent, and neglected children, and children in danger of becoming delinquent.”
Despite the Children’s Bureau’s newfound authority to regulate care of neglected children, the Bureau did not pay much mind to child maltreatment for the vast majority of the twentieth century. Neither did the states, with thirty-two states having no form of child protective services as of 1956. However, child abuse became an issue of national attention in the 1960s after an article about Battered Child Syndrome made waves in 1962. Following this increase in national concern, states began to augment their welfare agencies, and nearly all moved away from the use of non-governmental organizations (NGOs) and instead placed child welfare responsibilities under the wing of the government. As child abuse became a greater and greater focus across the United States, the federal government still lagged in its response—in 1973, U.S. Senator Walter Mondale wrote, “Nowhere in the federal government could we find one official assigned full time to the prevention, identification and treatment of child abuse and neglect.”
The late twentieth century saw massive change and development in the federal government’s response to child abuse and neglect. In 1974, Congress passed the Child Abuse Prevention and Treatment Act (CAPTA), authorizing expanded federal funds and guidance to specifically improve states’ response to child abuse and neglect. CAPTA also notably created a federal definition of child abuse and required states to officially define child abuse in a manner consistent with CAPTA. CAPTA, to this day, is the primary legislation regulating the federal government’s involvement in state child welfare systems. Congress is able to amend and reauthorize CAPTA to allow it to grow and change, a process that has been successfully undertaken several times.
Although 1974 saw huge progress in the federal government finally creating an official response and course of action to combat child neglect, this rapid expansion created chaos in the states. The continued passage of new laws in this area—such as a law requiring professionals to report any suspected child abuse or neglect—opened the floodgates to a significant amount of new cases that completely overwhelmed the existing systems. The 1980s saw a system struggling to keep up with its newfound power and responsibility, sowing the seeds for the changes in the system that we see today.
Over the decades since the Children’s Bureau was first created, the federal child welfare system—and its state counterparts—have continued to expand and evolve. In the modern era, all fifty states operate their own child welfare systems; the federal government heavily subsidizes all. This subsidization and regulation of the state systems by the federal government continues to be authorized under CAPTA, which has been amended and reauthorized several times since its passage in 1974. In addition, the Children’s Bureau releases and distributes the Child Welfare Policy Manual to state governments, providing “policy questions and answers applicable to child welfare programs,” such that state systems understand the regulations placed upon them. CAPTA regulations make up just one of nine policy sections in the Child Welfare Policy Manual. Throughout its many amendments, modern-day CAPTA sets forth a list of requirements for state systems to follow to implement some uniformity in child welfare across the country.
Aside from the general regulations that states must follow, the Children’s Bureau also has several programs that add or divert funds to states implementing innovative approaches to child welfare. The two main examples in this area are the Title IV-E Waiver Program and a discretionary grants program. On the one hand, the Title IV-E Waiver program allows states to flexibly use funds that have already been allocated to them for direct services through the usual funding streams, providing an opportunity to test new methods and approaches. On the other hand, the discretionary grants program uses grant application procedures to award additional funds to states for specific purposes. Both Title IV-E waivers and specific discretionary grants require an application process by individual states, who must demonstrate why their programming is deserving of the additional or diverted funds.
While the vast majority of federal funding flowing into state child welfare systems is made up of the mandatory funding provided for in Title IV-E of the Social Security Act, around eleven percent of annual federal child welfare funding goes into discretionary programs. Approximately $200 million is invested annually by the Children’s Bureau into over 300 different discretionary grants spanning 50 different program areas, all of which are aimed at augmenting the knowledge base for child welfare services. Throughout the funding period, the Bureau continues to monitor and evaluate the success of the program.
The allocation of funds specifically for discretionary spending is built into the congressional budget each year as part of the overall funds appropriated to the Children’s Bureau to carry out its mission. However, the Bureau has sole discretion over how and to whom the funds get disbursed. Therefore, while an increase in overall discretionary funding would require congressional approval, a reallocation of discretionary funds within the quota already allocated to the Bureau gets handled within the agency.
In doling out discretionary funding, the Bureau’s grant award process operates with principles similar in nature to procurement awards. They engage in several phases, including planning, funding announcement, application review, awarding, and monitoring of progress. In the planning phase, the Bureau identifies areas where knowledge gaps exist and decides how much discretionary funding should be allocated to that area. They then post notice of funding opportunity on Grants.gov, where a variety of entities, such as “state and local public and private health and human services agencies, university- and hospital-affiliated programs, and community-based programs,” may apply to receive funding under that program. The applications are then peer-reviewed by child welfare researchers, practitioners, and other experts to select the awardees.
Once an awardee is chosen and their program receives funding, the Bureau undertakes an ongoing monitoring and evaluation process for the duration of the award, for which they ask awardees to allocate ten to fifteen percent of their allotted funding. The majority of the evaluation process is completed through regular reports required of awardees, who are also responsible for disseminating the findings from their programs to the wider child welfare community. The theory behind the requisite information circulation is that the discretionary funding will not only allow the awardee’s system to improve based on their findings, but will allow other jurisdictions to learn from their work and have a more widespread positive impact on the system as a whole.
Discretionary grants under the Children’s Bureau are categorized into eight different umbrellas: 1) Adoption opportunities; 2) Child Welfare Training; 3) Abandoned Infants Assistance; 4) Child Abuse Prevention and Treatment Act Discretionary Funds Program; 5) Community-Based Grants for the Prevention of Child Abuse and Neglect (CBCAP); 6) Infant Adoption Awareness Training Program; 7) Promoting Safe and Stable Families (PSSF) Program; and 8) Family Connection Family Group Decision Making (FGDM). Most relevant here is the Child Abuse Prevention and Treatment Act Discretionary Funds Program, which “[s]upports research and demonstration grants and training programs for preventing child maltreatment.”
The Eleventh Amendment to the Constitution establishes the basis for the concept of Sovereign Immunity: “The Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State.” In the 1890 Hans v. Louisiana decision, the Supreme Court held that, in addition to the federal government, states, as sovereigns, were immune from suit by their citizens based on common law principles.
Although sovereign immunity is not automatically granted to jurisdictions smaller than states, many states have, through legislation or case law, extended protections to local governments. On the other end of the spectrum, some states have followed the federal government’s lead with the Federal Tort Claims Act and have passed laws waiving their immunity and agreeing, under certain circumstances, to be sued in tort by their citizens. Yet another grouping of states have passed legislation to waive their sovereign immunity only in cases of gross negligence, which presents a very high standard to meet for plaintiffs, and does not often result in a finding of guilt for the state. As discussed below, sovereign immunity and its application to the child welfare system has a tremendous impact on the rights of children and families impacted by the system.
Given that each of the fifty states operates its own child welfare system, it follows that each of these systems would operate with some degree of non-uniformity. One of the biggest differences between various systems is whether they are public or privatized. Throughout the history of the United States, the child protection system has consistently established partnerships between public and private organizations. Where public systems are still operated entirely by state agencies, privatized ones contract out some or all of the responsibilities to private organizations, often nonprofits. The goal of privatization in child welfare is to remedy the limited capacity that overburdened state agencies have to operate these systems by transferring operations to nonprofit organizations that are entirely dedicated to performing these services.
Privatization exists on a spectrum within the child welfare world. States with notable efforts in this realm include “Kansas, Nebraska, Texas, Georgia, Florida, Pennsylvania, and Michigan”—though more are expected to follow their lead. The traditional privatization approach is for states to keep core child protection services within the public agency’s operation, while contracting out specific direct services such as foster care. Other partially privatized systems, such as Pennsylvania, contract out a larger array of services while leaving oversight under the purview of the government. At the far end of the continuum lie states like Florida, which have, through legislation, created entirely privatized systems, with outside organizations handling nearly everything, from case management to provision of services.
While the privatization of social services is always a controversial topic, it is especially so in the child welfare world, where the stakes are high. One of the core arguments for privatization is that the use of performance-based contracts allows child protection agencies and contractors to truly focus on best practices for the children that they serve, given that there is a system of evaluation built in. Research has shown that privatization allows for better outcomes for child safety and that the structural changes to funding streams for child welfare in the privatized model allow more resources to be directed to a full set of wraparound services, including prevention, family preservation, and a focus on family reunification. Privatization efforts have lowered foster care populations in some jurisdictions and have helped to hold both state agencies and contractors more accountable for their outcomes.
The goals of privatization are also in line with recent legislation evolution by the federal government. The Family First Prevention Services Act, signed into law in 2018, includes provisions to “enhance support services for families to help children remain at home, reduce the unnecessary use of congregate care, and build the capacity of communities to support children and families.” The Act indicated the government’s dedication to using foster care as a last resort only, with emphasis on prevention efforts and upholding the ultimate goal of family reunification. All of these goals are in line with the goals of the privatization efforts in state child welfare systems.
However, some case studies, like the initial study of the new private system in Florida, have shown that while privatization reduces foster care populations, it increases injuries and harm to children who have not been removed from their homes. Another major critique of privatized child welfare is that due to the nature of contracting, children are treated as commodities rather than human beings. Ultimately, the jury is still out on the efficacy of privatizing child welfare systems, and this Note declines to take a stance on that particular question. However, as more and more states expand privatization each year, existing issues facing the privatized child welfare world will ultimately become more widespread. There is no limit to the benefit of having a tested solution in place for these privatized systems prior to these issues becoming more widespread than they already are.
“It is now a documented fact that no child is safe today in [the state’s] foster care.” This Note will discuss the overwhelming quantity of lawsuits that are filed each year by children and families harmed by state child welfare systems as well as the need to provide these plaintiffs with meaningful remedies for their injuries. However, it is important to first recognize that if the system were operating more effectively and efficiently, there would be less need for legal action and remedy.
It is no secret that the child welfare system, like many of our social systems, is incredibly overworked, overburdened, and overwhelmed. In both public and private systems, caseworkers are given unmanageably high caseloads, resulting in deficient relationships between case workers and children, decreased ability of workers to fully focus on child safety issues, and ultimately more children spending longer in homes that are unsafe. Despite high caseloads and the abundance of stressors associated with the job, child welfare workers have an average salary of only $43,000 per year. The combination of these factors leads to high turnover rates, which further deteriorates the quality of care. It is outside the scope of this Note to address the clear need for an overhaul of a much larger scale to the operation of the child welfare system across the nation. However, until that can happen, harm will continue to occur in the existing framework, and we must provide an adequate opportunity for redress for families that experience this harm. A solution focused on rectifying the issues discussed in this Note should also have some element of effort towards reducing the damage done by the system.
“For a line of work that is already complicated, underfunded, and weighed down by regulation, soaring insurance premiums may be what causes utter collapse.” An anecdotally widespread but surprisingly poorly documented issue facing child welfare contractors is the increase in liability insurance premiums resulting from an onslaught of lawsuits with large insurance-backed payouts. As mentioned, this problem is certainly under-researched with respect to the child welfare contracting world. However, across other industries—from auto accidents to daycare center liability—there is a well-documented connection between an influx of losing lawsuits and an increase in the price of liability insurance.
Given that child welfare contractors are already underfunded, a drastic increase in the cost of liability insurance—which they are mandated to have in order to be awarded contracts—can make it extremely challenging or even impossible to maintain the responsibilities that they have been contracted to complete. This leads to the contractors either being forced to provide diminished services or to give up their government contracts entirely, leaving the government scrambling to find a replacement to serve these vulnerable populations. Both of these scenarios result in a higher likelihood of harm to the children being served, which makes this a problem worthy of attention in the government procurement world.
Although this problem is grievously under-researched, partly due to the novelty of the issue, Philadelphia’s system provides a real-life example of this playing out in real time. As discussed in the introduction, TPFC was awarded four out of Philadelphia’s ten available contracts for child welfare services, serving over 3,000 children across the city. Throughout the execution of these ongoing contracts, the contractor was sued fifteen times. According to sources at TPFC, the liability insurance provider “never wanted to take the cases to court, so it settled them.” This onslaught of large settlements resulted in their insurance provider increasing premiums by ninety-eight percent between 2017 and 2020. The cost of the requisite liability insurance was, at this point, prohibitively high, and TPFC could not afford to pay the premium and keep its doors open, let alone provide the quality of services that its young clients deserved. In early 2023, the cost became too much, and TPFC informed Philadelphia that they were unable to carry out their contracts with the city. This left the city to rush through the lengthy procurement process to avoid leaving vulnerable children without services. After TPFC’s departure, other child welfare contractors in Philadelphia facing the same issues have followed suit and been forced to drop their contracts with the city.
In summation, private child welfare systems are on the brink of collapse due to the following series of events. A general lack of funding invested in these systems nationwide leads to children being harmed in the system, and these injuries result in lawsuits from which contractors are largely not immune. Large insurance payouts from such lawsuits lead to instability within the liability insurance system, which results in contractors being unable to meet the requirements for being awarded a child welfare contract. This cycle is aggravated and accelerated by the existence of sovereign immunity providing protection to states and their agencies, creating vulnerabilities for contractors and the populations that they serve.
In public and private child welfare systems, the long-standing tradition of sovereign immunity prevents redress for children harmed. As mentioned above, states extend sovereign immunity in a variety of ways, but the protection is typically available to state agencies—and, in states with extended sovereign immunity legislation, to local agencies as well. Given that child welfare services are, at the very least, overseen by agencies, this extension of the doctrine means that agencies are immune to liability for any harm that comes to children in their care. Further, government employees such as child welfare and social workers are entitled to the same immunity protections as the agencies themselves when they are sued in their official capacities—as “[o]fficial-capacity suits are merely another way of pleading an action against the governmental entity”—meaning that those making the final decision that leads to children being harmed are often protected from legal repercussions.
Liability becomes more complicated in states that have passed legislation waiving their sovereign immunity, or “consent to suit” statutes. These statutes are typically accompanied by specific procedural regulations, such as requiring agencies to purchase liability insurance to protect against litigation as well as limiting monetary awards that plaintiffs are able to receive from a liable agency. Although sovereign immunity doctrines—and protections for governments that choose to waive such protections—are understandable and serve a valid purpose, in states with fully public child welfare systems, these state protections leave families without access to sufficient remedy for their injuries.
At first glance, this problem simply does not exist in systems with some level of privatization—simply sue the contractor who cannot avail themselves of the same sovereign immunity privileges. However, this “solution” is neither as clear-cut nor as beneficial as it may seem. There are countless examples of child welfare contractors being sued by injured families unable to sue anyone else. While this is not necessarily a problem, as the ultimate goal of any reforms made in this area should be to provide some form of relief to injured children, some seemingly insurmountable issues emerge from relentless lawsuits against contractors; namely, their inability to fulfill contracts, as discussed above.
In the words of Justice Louis Brandeis, “A single courageous State may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country.” With such varied approaches being taken in each state across the United States, the child welfare system is an example of how the federal government allows states to be laboratories. In fact, the Children’s Bureau, through its waiver discretionary grant programming, incentivizes states to turn themselves into these laboratories with increased or more flexible funding for implementing innovative prevention programs. Florida has benefited greatly from the Children’s Bureau’s Title IV-E Waiver Program, and it is particularly relevant here, given its extensive privatization efforts and efforts to mitigate the liability insurance crisis through innovative legislation.
In the mid-1990s, after many years of complete control by Florida’s Department of Children and Families (DCF), the legislature decided it was time to explore privatization due to a “belief in the greater competency of the private sector . . . .” Five private organizations participated in a test run of the legislature’s plan to determine whether private agencies were able to effectively operate a child welfare caseload with just the finite amount of money that would be awarded to them. Following the pilot program, the state decided to proceed with its privatization plan, “[d]espite a lack of evidence that privatized services were any better in ensuring the safety and well-being of vulnerable children than publicly provided child welfare services, and even some findings to the contrary . . . .” A 1996 legislature officially mandated the privatization of the state’s child welfare services, and Florida rolled out the new operations in stages, with full privatization accomplished in 2005.
Florida’s privatized system continues to operate with fairly standard government procurement procedures. DCF uses a competitive bidding process to establish contracts with lead agencies, allocating almost all of DCF’s authorized resources to contractors, though DCF does still retain control over and funding for child protective investigations. The lead agencies then subcontract out services to local community-based nonprofit organizations. This system of subcontracts, referred to as a “Community-Based Care” structure, can be more costly due to the increased overhead of having more contracts. However, this system is considered beneficial due to direct services being provided by organizations that are local to and familiar with the communities they are serving, rather than a large bureaucratic state agency.
Florida’s innovative privatized system has also, from 2006 to 2012, taken advantage of The Title IV-E Waiver Program. The waiver program grants the states with flexibility on how they implement their foster care funding, specifically for the purpose of “test[ing] innovative approaches for child welfare service delivery and financing.” Florida received a Title IV-E Waiver to implement innovative measures to reduce the number of children removed from their homes and to reduce the length of removal for those who must be removed. They attempted to use the newly allocated funds to “develop innovative preventive and diversion programs to address child safety concerns while maintaining children in the home” by emphasizing parental involvement and family connections. During the 2006–2012 waiver period, there was a thirty-five percent decrease in removals, and it is believed to have “engendered a real shift in the way many child welfare stakeholders thought about family, parenting, poverty, and child abuse.”
Although Florida has seen positive results from its privatization efforts and innovative programming through the waiver program, its system has struggled with the insurance issues mentioned above. However, Florida’s legislature is one of the few in the country that has come up with a wraparound set of legislation to address these issues, protecting contractors while still leaving some outlet for remedies for injured parties. The solution involves several pieces of legislation that work together to extend sovereign immunity to child welfare contractors, set a cap on damages that may be sought against liable contractors, and create a statewide risk pool set-aside fund for damage awards.
First, in July 2021, Florida passed a bill that amended an existing statute and extended sovereign immunity protections to any member of a “child protection team” (CPT). CPTs are made up of professionals who “receive referrals, primarily from child protective investigators and sheriff’s offices, when child abuse, abandonment, or neglect is alleged; the team, directed by a physician, evaluates allegations, assesses risks, and provides recommendations for child safety and support services.” The innovative piece of this legislation was that it applied to all members of CPTs, including contractors.
Second, in 2023, Florida enacted a statute that limited damages that can be sought against agencies or their subcontractors, setting a cap of $2 million per liability claim. The goal of such a damages cap is to reduce contractor vulnerability while increasing the willingness of insurance companies to provide liability coverage since there is less risk they will have to cover unfeasibly large lawsuit payouts.
Lastly, in 2023, the legislature passed a statute mandating the creation of a statewide risk pool or set-aside fund. The statute required that DCF develop this fund to “mitigate the financial risk to eligible lead [contractors].” The goal of this legislation was to “protect the financial interests of the state and spread the risks and accountabilities of the system of care amongst qualified entities.” This approach is seen as a sort of safeguard to mitigate against the risk exposure faced by these agencies and has a calming effect on insurance premiums. Given that this grouping of legislation is incredibly new, there is not much research on how successful it is in curbing the growing insurance crisis; however, in theory, it seems to provide a promising answer to this crisis. To find and implement a more generalizable and wide-reaching fix to the national child welfare insurance crisis, the federal government can look to Florida to form the basis for a solution. The recommendations discussed below aim to rectify contractor vulnerability while simultaneously promoting safeguards for positive outcomes for those involved in the system.
To combat two major problems facing modern child welfare systems—a need for new approaches to improve outcomes and an emerging liability insurance crisis—the Children’s Bureau should utilize its discretion and appropriated funding to kill two birds with one stone. Through the Title IV-E waiver program and the various discretionary grant programs, the Children’s Bureau has already made clear its support and willingness to aid individual states in implementing innovative measures to better the system. To protect contractors by mitigating the insurance crisis while still leaving remedies available for injured parties, the Children’s Bureau should create a new discretionary grant under the CAPTA Discretionary Funds Program to specifically allocate funds to privatized systems.
This new grant would be awarded to states with privatized systems that submit compelling proposals for innovative research or methods aimed at reducing child maltreatment, which, in theory, will ultimately reduce the quantity of lawsuits filed. In addition to the funding provided to implement the innovative programming itself, the grant award would include additional funding for the purpose of establishing a statewide shared-risk pool. The state or agency would also be required to pay into the pool, which would be used by vulnerable contractors across the state to supplement insurance payouts for lawsuit losses or settlements. Only available to state child welfare systems that have some level of privatization, the grant would aim to be awarded to jurisdictions needing an extra support system while dealing with the insurance crisis. Given that discretionary grants last only for a limited period of time, this grant is not meant to be a permanent allocation of funds but rather a stopgap solution allowing states to protect contractors in the short term while experimenting with long-term solutions that will make this additional funding less necessary.
The use of the discretionary grants program rather than an update to the Title IV-E Waiver program is a more efficient and effective solution for several reasons. First, as indicated above, inadequate funding is already a glaring issue, reducing the efficacy and safety of child welfare. Part of the issue with the Title IV-E Waiver program is that it asks states to implement innovation by stretching the already scarce federal funds that they receive in the hope that the new methods will reduce the traditional need for funding. It would be much more efficient to operate under the assumption that states will need extra financial support to create true reform in their systems, especially with the ongoing insurance crisis. Asking states to stretch their budgets and personnel resources in a whole new direction is not an effective way to inspire and encourage reform. Therefore, this solution should be implemented using the discretionary grants program.
Second, the Title IV-E Waiver program is overly broad in its scope. Not only does the program have limited and broad requirements for waiving into the program, but it also does not impose a strict set of regulations upon the states that waive in. This would be less effective here, because the proposed solution needs to be narrowly tailored in terms of both which states are eligible as well as what is required of awardees and how the awarded funds are used. Use of the discretionary grants program, all of which are extremely specifically tailored to meet certain objectives, is a more effective way to create improvement in this specific area.
Third, although the Title IV-E waiver program is intended to allow flexibility, the program is more intensely regulated by Congress, meaning that any changes to the program, which would be required to make this solution workable, must be authorized by Congress, which is no small task. Although asking for additional discretionary funding to be added to the Children’s Bureau’s annual budget requires congressional approval, discretionary funding is already built into the budget and how that funding gets allocated does not require congressional approval. As of 2011, when Congress last reauthorized the waiver program, the Children’s Bureau was only authorized to provide ten states with waivers per year. Given the rate at which states are choosing to privatize and at which these insurance issues are popping up, there may soon be much greater demand for this solution than just ten states per year, and increasing the capacity would require another congressional reauthorization. Implementing a new discretionary grant would require only that the Bureau utilize its allotted discretion; the Bureau creates new funding opportunities every year within its allocated budget, and constructing this new budget would not require any action from Congress.
Overall, attempting to use the Title IV-E Waiver program to implement this solution would require both a complete overhaul of the structure of the system as well as congressional approval of the proposed overhaul. The discretionary grant program is favored here due to its flexibility, lack of congressional authorization and approval requirements, and ability to tailor the needs to a specific cause and set of goals.
Shared Risk Pooling is a societal construct that involves multiple entities coming together and forming a pool of collective resources to protect against catastrophic risk situations. Each entity pays into the pool and is then entitled to petition the pool to help cover their losses, typically only under extraordinary circumstances. Insurance itself is a form of risk pooling in that each member pays a set amount to create a pool of funds managed by the insurer that then gets paid out to members facing financial losses. On a larger scale, multiple insurance providers may create even larger risk pools by entering into an aggregated pool that each provider may access. Government entities also use risk pooling as a sort of backstop for insurance; for example, the federal government has used risk pooling to provide health insurance to those considered “uninsurable” by insurance providers.
Outside the insurance context, there are several other ways that government entities incorporate risk pooling into their structures. “Pools were created to reduce and stabilize long-term insurance costs and ensure access to coverage and service needed to sustain key local government functions.” For example, shared risk pools may exist between different departments of one jurisdiction’s government, or multiple local government entities may pool their risk together to save money. These pools allow each individual body to save money by reducing any “padding” in their budget, because they are able to protect against any unforeseen circumstances through entering into the pool. Risk pooling is also used internationally in the context of “foreign catastrophe risk pooling,” which provides a fast and efficient method of financial support for less developed countries facing catastrophic natural disasters. The world of public procurement also relies upon risk pooling, with the FAR allowing agencies to enter into a risk pool with contractors to mitigate costs for the government.
In the context of the child welfare system, where the insurance industry is in a frenzy attempting to cover large losses faced by contractors, a risk pool would likely help calm the industry and allow premiums to return to normal. By aggregating resources from contractors and agencies across each state, a safeguard is in place for contractors experiencing extenuating circumstances that threaten the delivery of their contracted services. However, the creation of a risk pool would not replace the requirement for liability insurance, which, given the current state of the child welfare insurance industry, means that states and contractors would likely need financial support to get a risk pool started.
The proposed new discretionary grant would, in addition to providing funds for innovative methods, provide supplementary funds to awardees to help establish a risk pool to furnish some level of protection. Instituting a risk pool for this purpose would be a requirement of the grant award, and the Children’s Bureau’s extensive monitoring and evaluation of awardees would allow it to ensure that states were following through with this requirement rather than using the funds allocated to that purpose for something unrelated. Given that only state agencies would be considered as awardees for the grant, it can be assumed that they already have the infrastructure in place to facilitate the creation and necessary oversight of the risk pool. Assuming that the risk pool operates as planned to calm the insurance industry and reduce contractor vulnerability, the state and its contractors would then be responsible for paying into the pool to maintain it. The federal government would not intend to subsidize these pools permanently; they are simply a temporary measure to calm the insurance industry and allow contractors to get back on their feet. Since grants under the Bureau are time-limited, a clear conclusion to federal support is already in place, which would encourage states and contractors to be prepared to fund the pool themselves by the time that the grant period ends.
To mitigate the harmful effects of the current insurance crisis plaguing privatized child welfare systems across the country, the Children’s Bureau should implement a new discretionary grant. Placed under the CAPTA Discretionary Funds Program, this new grant would be available to jurisdictions with partially or fully privatized systems. In return for these jurisdictions proposing innovative solutions to improve child safety in the system, awardees will be rewarded with additional funds to cover both the proposed programming as well as to start a statewide risk pool to mitigate the insurance issues. This solution will not only provide a short-term fix by calming the insurance issues and allowing premiums to come down but also looks to discover a method of improving child outcomes in the system as a whole by using the states as laboratories of democracy.
