State takes aim at reducing jobless overpayments

September 16, 2013

Indiana, one of the first states to automate the jobless-claims process, will soon require beneficiaries to appear in-person at WorkOne centers.

The Department of Workforce Development hopes the counseling that people receive will reduce their job-search time by two weeks and, because they’ll have to show identification, take a big bite out of fraud.

It's the first time DWD has required anyone drawing state benefits to verify their eligibility in person.

“We see this as a huge fraud killer right here,” DWD spokesman Joe Frank said.

Several other states have required in-person reviews for years, and the federal government, which kicks in benefits after 26 weeks, began a similar requirement early this year. Starting in mid-October, people drawing Indiana benefits will have to report to a WorkOne center after their fourth week.

The Indiana Chamber of Commerce supported legislation that easily passed in the 2013 session, allowing DWD to implement the new rule.

"In some respects we may have gone too far [previously] in making it easy for people to sign up for [unemployment benefits],” chamber President Kevin Brinegar said. “In the process, it facilitated a lot of fraud.”

Indiana overpaid recipients $34 million—or 4.1 percent of the total unemployment insurance payout—in the fiscal year ended June 30, Frank said. DWD estimates that $7.7 million of that was the result of fraud, which the state defines as “knowingly and intentionally” claiming benefits while working, or some other scheme. The remainder of the overpayments are considered mistakes.

Many people continue claiming benefits after they’ve started a new job before receiving their first paychecks, but it’s because they don’t understand the rules, Frank said. DWD chalks those overpayments up to claimant error.

Frank said Indiana has the sixth lowest overpayment rate in the country.

In the past, the U.S. Department of Labor has flagged Indiana for a high rate of improper payments, which is a measure of internal record-keeping. Based on a survey of improper payments from state and federal unemployment insurance funds, the DOL said Indiana’s three-year rate in 2012 was 49 percent. Frank said the high rate stems from errors people make when reporting their work searches online and doesn't necessarily mean they're ineligible.

Overpayments ultimately hit the state’s employers, who pay into the system based on the number of claims against their accounts. Indiana employers have seen their average tax rate rise from 2.61 percent in 2009 to 3.14 percent this year. They're also paying $63 per employee because of the state's $2 billion debt to the federal government for covering the state's underfunded unemployment insurance trust account. 

There are about 40,500 Hoosiers drawing state-funded benefits and nearly 20,000 drawing federal benefits, according to DWD. The number drawing long-term federal benefits has dropped by half since January, Frank said.

DWD Commissioner Scott Sanders testified to Congress on Sept. 11 about various fraud-reduction efforts, including a partnership with the Marion County Prosecutor. Other states cut down on improper payments and reduced their overall costs by requiring in-person assistance as long ago as 2009, Sanders noted.

Indiana does require beneficiaries to apply for three jobs a week, but they only have to document their work search in a voucher that’s submitted online. Insincere applications are bogging down legitimate hiring efforts to the point that people will openly decline interviews, Brinegar said.

“The UI system is supposed to be a stopgap,” he said. “They should have to show that they’re willing to work at the jobs they apply for.”

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