Who’s the boss?

The Nonprofiteer met an embittered teacher once who said, "You think principals and teachers and school boards decide what happens in schools, but it’s really bus companies and insurers."  An overstatement, no doubt, but it came to mind at the news reported in the Chicago Tribune that Chicago’s Catholic Charities will stop providing foster care after 90-plus years because it can no longer secure liability insurance for the program.  The agency settled an abuse lawsuit, the insurer had to pay (although not the full amount, and not promptly) and then when it came time to renew, the insurer didn’t. 

[Asides: first, the abuse lawsuit had nothing to do with the clergy sex scandals in the Catholic Church; it alleged and proved failure of oversight by the agency when foster parents abused three children placed with them by the Charities.  Second, the polite folks at Catholic Charities have refused to name the insurer.]

Catholic Charities serves 900 children each year, and has operated foster care in Illinois since before the state a Department of Children and Family Services.  That is, it actually did what many charities hope to do: create a program, demonstrate its value and persuade the government to take it over.  But government support doesn’t eliminate the need for foster placement agencies, or for the fundraising efforts they make on behalf of their wards.  Catholic Charities supplemented public funds to the tune of $1.7 million a year.  If an established agency of this magnitude can be taken down by an underwriter’s ruling, it’s time for intervention.

The Federal government was forced to become an insurer of last resort for floods because private insurers simply wouldn’t sell flood insurance.  And the Feds likewise insure student loans (through Sallie Mae) and mortgages (through Fannie Mae and Ginnie Mae), because if they didn’t there would be no such loans.  What insurer would want to take those bets?

We can debate the wisdom of the Feds’ offering flood insurance–does it merely encourage people to move back to areas that are subject to flooding?–and even wonder whether student loan guarantees merely serve to push tuition higher.  But it’s hard to imagine what perverse incentives would be created by the government’s offering liability insurance of last resort to agencies that care for children–it’s not like people will have and abandon more children as a result. 

Perhaps a legislator near you should propose this idea–now, before more agencies follow in the footsteps of Catholic Charities.   

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2 Responses to “Who’s the boss?”

  1. Stephen Says:

    Is a legislator really needed?

  2. Nonprofiteer Says:

    Actually, I’m afraid 50 legislators are needed. Insurance has traditionally been regulated by the states (which helps explain why the American health insurance system is such a confusing mess), and any requirement that private insurers continue to cover child welfare agencies, or proposal to replace such coverage with a government program, will require legislative authorization and (possibly) appropriation. If there’s a shortcut I’d be glad to hear it!

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