Fraud and equity must go hand-in-hand when modernizing unemployment insurance

During the first three months of the pandemic, a whopping 52 million people applied for unemployment insurance (UI) benefits, representing 21% of the U.S. adult population. This unprecedented surge of UI claims strained newly remote state workforces, laying bare the cracks in our UI system and opening the door for bad actors. The Government Accountability Office estimates that fraudsters stole up to $135 billion from UI programs during the pandemic.

Now, lawmakers are grappling with how to respond, and they have mixed opinions. Some argue that fraud prevention is paramount, while others caution that added fraud prevention measures, such as identity verification, can negatively impact accessibility and equity. But in reality, it’s not an either-or proposition. A recent report from the Bipartisan Policy Center found that preventing fraud is essential to improving equity, while practices that promote equity and accessibility can help prevent fraud.

At Nava, where we partner with government to build simple, effective and accessible services at scale, we’ve gained years of expertise in the UI space.

Our experience has shown that fraud and equity should not be viewed as mutually exclusive; Rather, preventing fraud and building equity go hand-in-hand. Modern, human-centered technology can make it easier for people to correctly submit UI applications, increasing accessibility and equity. In turn, this reduces the amount of time agency staff spend reviewing potentially fraudulent claims, helping them focus on the ones that are truly fraudulent. Meanwhile, deterring bad actors with fraud prevention measures helps agency staff spend less time evaluating fraudulent claims and more time getting benefits to those who need them.

Sens. Ron Wyden (D-Ore.) and Mike Crapo (R-Idaho) recently introduced bipartisan UI modernization legislation that underscores the link between preventing fraud and promoting equity. The bill calls for improved data sharing practices to prevent fraud and outlines new technology requirements for states to build equity and accessibility into their UI programs.

With funding from the Department of Labor, a number of states are already implementing effective solutions. These success stories demonstrate that combating fraud builds equity, and vice versa. Alabama, which used DOL equity grant funding to provide hands-on UI support to underserved populations, has seen its overpayment fraud rate decrease by over 10 percentage points since 2021, according to DOL data.

New Jersey also benefited from DOL support.

“The funding we’ve received through the American Rescue Plan to modernize our unemployment system has been critical,” New Jersey Labor Commissioner Robert Asaro-Angelo said at a House Ways and Means Oversight Subcommittee hearing. “Building a newer, more modern system improves equity of access and security — which go hand-in-hand with fighting fraud.”

Rather than targeting fraudsters after they’ve submitted UI claims, we must enact measures to prevent them from entering the system in the first place. When fraudulent claims comprise a significant portion of UI claims — as was the case in many states during the pandemic — then tracking down fraudsters can divert time and resources away from creating systems that are equitable, accessible and adaptable. For example, Vermont said over 90% of online claims it received during spring 2021 were fraudulent. To quell this issue, the Vermont Department of Labor had to stop accepting online claims for new filers temporarily, limiting access to an important lifeline for many.

To deter fraudsters from the get-go and redirect resources to helping jobless workers, states can benefit from shoring up identity proofing methods, such as ID.me or the General Service Administration’s Login.gov. To deter fraudsters from the get-go and redirect limited resources to helping jobless workers, states can benefit from shoring up identity proofing methods. Kentucky’s fraud rate, for instance, dropped from over 30% to roughly 2% after the state implemented digital identity proofing. To maximize accessibility, states should pursue a modular identity proofing method that supports virtual or in-person verification.

Better data-sharing practices can also prevent fraudsters from beginning the UI application process. During the pandemic, individuals committed fraud in multiple states, uncovering the need for a centralized system that could enable states to cross-match claimant data. DOL answered with a solution — the UI Integrity Data Hub (IDH) — which is operated by the National Association of State Workforce Agencies (NASWA) and enables states to share claims data with each other and identify fraudulent activity. As of August 2024, the IDH helped prevent $4.2 billion in erroneous payments. IDH isn’t the only tool of its kind; states have developed many solutions to cross-match claims data, based on their unique needs.

In addition to leveraging claims data, state UI agencies can use cloud technology and application programming interfaces (APIs) to maintain better data and security practices. Many states rely on decades-old mainframe systems that make data-sharing and adapting to changing security standards difficult. Cloud-based systems, by contrast, are adaptable, resilient and more secure. APIs enable disparate systems to communicate, and when used in tandem with the cloud, can streamline data-sharing between state UI agencies and external sources.

Modular, cloud-based systems make for a better claimant and staff experience because agencies can easily integrate new technologies with equity and accessibility in mind. For example, agencies can use this technology to create custom data dashboards that staff can use to identify suspicious activity. Not only does this safeguard against fraud, but it also frees up time for agency staff to focus on timely payment of benefits.

State government leaders cannot ignore the claimant experience when seeking to prevent fraud. Easy-to-use claimant portals, modeled after products that already exist in the private sector, can improve claimant experiences and promote equity and accessibility. Providing claimants with information on their benefits in plain language eliminates confusion, reduces call center volumes, and enables UI agents to focus on bad actors.

When New Jersey built their new UI application, they leveraged user research and agile methodology to ensure that it’s intuitive, usable and accessible. Claimants can apply for benefits in fewer steps than the legacy application, they can save and finish their application later, and they can access the application on all devices. Once claimants submit their applications, they’re directed to a confirmation page with plain language instructions on what to do next. This contributed to a 20% increase of claimants taking the right next step — verifying their identities — after submitting their claim. The state’s call center experienced a 65% decrease in calls about identity verification, in part due to user experience (UX) improvements to New Jersey’s identity verification process. Previously, questions about identity verification were the top reason claimants contacted the call center.

Of course, states need resources to modernize. DOL has led the way by providing targeted grants that are helping state UI programs, such as the ones mentioned in this article, become more resilient and equitable. Their leadership and support will enable states to iterate on existing improvements, raising the bar rather than siloing progress. The Wyden-Crapo bill is a great next step, and we hope momentum for long-term, stable modernization support will continue.

Acting Secretary of Labor Julie Su often compares UI programs to a leaky roof.

“When there’s sunshine, you can get away with patching it,” she says. “Then, when the storm hits, the problem of neglecting repairs and postponing changes becomes clear.”

The storm of the pandemic has subsided, and now we repair the roof.

Rohan Bhobe is the co-founder and CEO of Nava PBC.

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