While local childcare centers continue to grapple with harsh economic realities, some now find themselves confronting an additional burden as a spate of insurance companies have recently dropped or altered their liability insurance policies.
In March, Heather Wells, the director of The Growing Garden Childcare Center in Tarentum, received a letter from her insurance provider saying they would not renew her policy. At the time of her July 20 interview with PublicSource, Wells had just three days left to find new coverage.
This was despite her insurance broker’s best efforts, she said.
“I’m very scared, because, I’m like, ‘What’s it going to cost me in the next three days?’” she said. “I don’t have a lot of time, and my agent has been working on this relentlessly for weeks.”
Childcare providers are required by state law to hold liability insurance at all times, so an unexpected drop in coverage or change in policy is an immediate concern for the daily operations of any childcare center. The average cost of liability insurance for commercial daycare centers varies, but for the daycare centers interviewed by PublicSource, the financial burden has generally constituted anywhere from roughly $1,000 to $3,000 per year.
“I’m very scared, because, I’m like, ‘What’s it going to cost me in the next three days?’”
This additional cost burden is hitting facilities already facing severe staffing shortages — nearly 90% of Allegheny County facilities say they are understaffed, according to Start Strong PA, a statewide advocacy campaign focused on affordable early learning. In a county where 5,851 children are on waiting lists, Start Strong PA indicates that around 80% of the need could be addressed if existing facilities simply had enough staff to fully utilize classrooms.
The state Department of Human Services as well as the Pennsylvania Insurance Department have responded to reports of these difficulties by conducting several surveys to establish the prevalence of the issue.
Another effort to control rising prices for a broad swath of agencies providing youth services under government contracts was signed by former Gov. Tom Wolf in November 2022. Rep. Kate Klunk, R-Hanover, authored the bill meant to ensure the affordability of commercial liability insurance by limiting the power of indemnification clauses. By imposing limits, service providers are no longer solely responsible for negligence that may occur by another party.
The cause of these new insurance trends is still largely unknown. “[These decisions are made] from a business standpoint because their losses are going to be too much,” said Jonathan Greer, CEO of the Insurance Federation of Pennsylvania. These losses hinge largely on the size and types of claims being made by policyholders, he said.
In the meantime, local daycare centers have been relying on word of mouth to share tips and discuss insurance companies. Wells is also part of a roundtable of childcare directors hosted by Trying Together, an advocacy group that works in partnership with the county’s Early Learning Resource Center. Around 75 centers are represented there, and according to Allison Robinson, the leadership development strategist at Trying Together, at least four childcare programs have shared insurance struggles.
“This has actually been going on for a very long time based on what they’ve been talking about, and I’m just the most recent hit,” said Wells of The Growing Garden. “Everyone is scrambling, and we’re not really getting much notice.”
Wells was eventually able to secure a new policy through her insurance broker before the deadline. It was significantly cheaper, dropping in yearly price from $2,510.25 to $1,361, although the new policy offered less comprehensive coverage and required significant changes to employee handbooks.
‘Cornered’ by childcare’s economics
Rose Marie Smith, the longtime director of Mt. Washington Children’s Center, thought she was alone when she received a letter informing her that her insurance was dropping her in late July. The center, in operation since 1972, had never run into an insurance issue before.
“It was a big surprise,” Smith said. “I called our broker this morning, and she hadn’t heard this information either.”
Her insurance provider said they were no longer covering independent daycare facilities, instead opting only for national chains. The industry-wide trend toward larger, consolidated daycare facilities has been documented in a 2022 study by Penn State Harrisburg, which found that smaller facilities were facing increased issues with financial viability.
The study noted that this shift could “impact the availability and accessibility of child care options for families but also have implications for cost structures, staffing ratios, and the overall quality of care provided.”
Other centers have been facing insurance issues far longer than Smith and Wells. Lesely Crawford, the director of ABK Learning and Development Center in Pittsburgh’s Hill District, first received a letter from her insurance provider telling her she was dropped back in 2021.
She said her insurance agent informed her that many companies were second-guessing childcare coverage in general. In the end, she was forced to take on a more expensive policy just to keep her center’s doors open.
“You’re between a rock and a hard place,” she said. “What do you do? You can’t say no.”
The strain on leadership at childcare centers has also been documented in recent studies. Directors’ salaries have decreased in recent years, according to the Penn State Harrisburg study.
Emily Neff, the director of public policy at Trying Together, said daycare directors have told her stories of forgoing their own paychecks or stepping into classrooms as teachers themselves just to help retain dwindling staff.
When centers close or reduce capacity, families suffer. Across Pennsylvania, 38,321 children are on waiting lists for daycares, according to a survey this year by Start Strong PA.
“Our programs tell me every day their waiting list is growing, that they get calls from parents in tears,” Neff said.
Staff are also suffering: The average salary for a childcare provider is less than $13 an hour, a wage that doesn’t meet the cost of living anywhere in the state, according to MIT’s living wage calculator. The strain of insurance coverage suddenly disappearing compounds these existing issues.
“How many people are they going to price out of business in this industry? It’s scary,” Wells said. “We’re being trapped, we’re being cornered and we’re not going to have a choice.”
Rebecca Spiess is a freelance reporter previously with the Pittsburgh Post-Gazette and can be reached at [email protected].
This story was fact-checked by Lucas Dufalla.