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Government | Fraud & Risk Management

Combatting Unemployment Fraud


For as long as state agencies have provided unemployment benefits to those in need, fraudsters have tried to exploit these programs. Agencies are experiencing a drastic rise in unemployment fraud – and at a larger scale than ever before.

Washington is just one example of a state ravaged by false claims, recently losing up to $650 million in fraudulent unemployment insurance benefits. Other states such as MarylandMichigan, and Pennsylvania have also been subjected to significant overpayments in recent months. By the end of 2020, the total impact of unemployment fraud was projected to cost up to $26 billion.

States are spending millions hiring “strike teams” to process claims quickly and accurately to prevent such losses. But with budget crises looming and elevated unemployment continuing, long-term solutions need to be put in place for determining and monitoring unemployment benefit eligibility.

Why and how unemployment fraud happens

Unemployment fraud can begin with individuals looking to play the system, employers falsifying qualifications for something like the Payroll Protection Plan or encouraging employees to file for unemployment, and sophisticated networks of hackers capitalizing on the chaos. There is also the ongoing issue of payments being granted to incarcerated individuals who aren’t even eligible for such benefits. Overpayments have increased significantly as many state agencies are overburdened and underequipped to handle the sudden influx.

These cases not only result in significant overpayments, but they also delay or prevent out-of-work individuals from receiving the payments they’re entitled to and subject them to the consequences of losing out on needed income. While it’s possible to go after the fraudsters and try to recoup the money, most of the money already paid in unemployment fraud is rarely recovered.

There is more ambiguity and potential for unconfirmed payments to individuals in different stages of the incarceration process in the current environment. Even if some individuals are ineligible for these public programs, agencies are overwhelmed with the vast amount of cases and it’s easy for fraudulent claims to fall through the cracks and result in a payout. In previous years, up to $205 million in unemployment insurance claims were wrongly paid to incarcerated individuals. That number is likely to grow in the next few years.

Fighting unemployment fraud with data

So, what can be done to prevent improper payments? The most important thing is to stop false claims before they happen, and leverage data to identify the status of individuals seeking benefits. Incarceration data is one key point in preventing improper payments as jailed individuals are not “able and available” for work. In most states, being incarcerated for even 3 or 4 days during a week disqualifies a person from receiving benefits that week. Having real-time data showing the current and recent incarceration history of claimants is crucial to prevention.

With real-time insight into incarceration data, workforce agencies can better monitor their beneficiary and claims lists to prevent unemployment fraud. They can also place “watches” on individuals to receive alerts if a recipient has been booked into jail, is serving a certain length of stay, or is being released from a jail/prison. The result is an intelligent, data-focused approach to prevent tens of millions in overpayments each year.

Staying vigilant and saving money

With the dramatic increase of unemployment fraud activity in recent years, state agencies need to be more vigilant than ever – including when it comes to claims from those in the incarceration process. Equipped with the right data and systems in place, these agencies can gain more control over the process to mitigate fraudulent claims and ensure taxpayer dollars are spent wisely.

As many states have already fallen victim to overpayments, it’s important to prevent additional instances now and going forward. With Enformion’s Health and Human Services solutions, agencies are equipped with powerful tools and data to combat unemployment fraud while increasing their savings and their ability to recover dollars lost through improper payments.

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