Why is day care so expensive but the actual day care providers make so little?

[Xolodno]

35. Yes. It is.

The liability insurance is enormous (depending on your state). And in fact, many companies that do take on the risk, re-insure it to limit their exposure. The profit is actually in insuring the facilities in the case of a property loss.

The Re-Insurance companies pool nationally on the liability and adjust the rate from where the risk is located. Which include variables on day-care employee to child ratio laws, day-care employee background checks, training, the venue's maximum liability payouts, etc. Basically, if you live a state that hates government regulation, the insurance rates go through the roof. If you live in a state that hits hard on regulation, insurance rates are lower, but employee costs go through the roof. Damned if you do or damned if you don't.

Bad day-care facilities may get sued (and lose their license), but the insurance company picks up the tab, for which, any person who uses day care, picks up the tab in the form of higher rates.

You could limit liability limits an insurance company can pay out....but then you have a moral hazard, what if the facilities assets are not adequate enough to cover the judgement amount above the liability limits? And it could actually cause less day care facilities to remain in business or scare off potential operators. They may not be willing to risk their capital on the negligence of a bad employee.

No easy answers.