Unemployment insurance (UI) is a valuable resource to help individuals have some financial stability while they are between jobs. It’s intended to be a temporary resource and not a full wage replacement. Unfortunately, like many other government programs, UI is riddled with fraud and abuse that threatens its solvency and stability. This has contributed to many states having to borrow billions of dollars just to keep their programs afloat.
Like most things about 2020, COVID-19 made it worse. When Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, included was a $600 weekly UI boost. The CARES Act’s UI boost ended up paying many recipients the equivalent of, on average, more than $50,000 on an annualized basis—making unemployment more lucrative than working and earning a living. To make matters worse, the boost in UI benefits became the number one reason for workers to refuse to return to work as states reopened.
Despite good intentions, the program did not have proper safeguards in place, and the predictable happened: Fraudsters and crime rings have taken advantage of those good intentions and robbed states blind. It got so bad, that even governors’ names were used to sign up for the program fraudulently.
It doesn’t have to be that way. We can look to states such as Florida and North Carolina on how to do UI right. Their proactive approach has carried them safely through economic downturns while other states were caught unprepared and underfunded.
So, what needs to be done? Here are five popular solutions to UI fraud:1. Crosscheck New Hire Records
Unfortunately, an all too common practice for unemployment claimants it to continue applying for benefits even when they have found work. We shouldn’t take it on face value or take someone at their word when they are seeking public benefits. In New Jersey, new hire crosschecks stopped 272,479 fraudulent enrollees and saved taxpayers $323.7 million. Plus, this solution is largely supported by the American people. According to FGA polling, 72 percent of all voters approve of new hire crosschecks.
2. Crosscheck Jail Records
To collect unemployment benefits, an individual must be available to work and actively seeking work, and that cannot be done while someone is in prison. This might seem like an obvious barrier to entry, but in several states it isn’t properly enforced. In Ohio, 1,500 prisoners were found receiving unemployment checks. After this check, they were removed from the UI system and taxpayers saved $1.7 million. And just like new hire crosschecks, jail crosschecks are widely supported as well. According to FGA polling, 64 percent of all voters support jail crosschecks.
3. Crosscheck Relative Data with Other Agencies
Other states have UI agencies with flagged cases. This data is freely available and ready to inform state agencies, and not using this information is a wasted opportunity. In Florida, more than 60,000 cases of fraud over nine months were discovered in 2015 alone. This saved taxpayers $529 million.
4. Utilize the Integrity Data Hub
The “Integrity Data Hub” is a product of the National Association of State Workforce Agencies. They call the program “a united front against fraud.” It’s a hub that allows states and agencies to share information and flag suspicious behavior. The more these entities participate, the more valuable a resource it becomes. As of September 30, 2020, $178.6 million in improper payments have been prevented by state agencies utilizing the hub. It is a powerful system meant to detect and prevent UI fraud.
5. Indexing Unemployment Insurance
This solution ties unemployment insurance to the economic conditions of the state. So, when the state’s unemployment rate is higher during tough times, unemployment benefits last longer. When the unemployment rate is lower, the benefits do not last as long. This moves people from welfare to work, it helps employers hire more workers, and it generally helps fill open jobs and lower the unemployment rate. It also ensures the system can focus on what it does best, which helps the system prevent fraud.
States that implemented FGA solutions to UI saw big improvements. Enrollees moved off the program nearly twice as quickly, UI taxes plummeted, UI trust fund solvency surged, and the cost of the program was 71 percent lower overall. What’s more important is that this system provided a long-term, more financially secure unemployment fund.