One of the most important features of unemployment insurance UI is the requirement in the Social Security Act that the program must be administered so that benefits can “be reasonably calculated to insure full payment of unemployment compensation when due.” The question of what it means for benefits to be paid “when due” came to the U.S. Supreme Court in 1971, and the decision in that case set a standard of paying benefits within a couple of weeks. Given that state agencies also need time to ensure accuracy in making benefit eligibility determinations, that is a pretty tight timeframe. However, workers who have experienced unexpected job loss need to get paid as soon as possible. Currently, 63 percent of workers in the United States don’t have enough savings to cover a $500 emergency expense, much less the loss of a job.
Unfortunately, nearly all states are lagging behind their pre-pandemic performance in paying benefits in a timely manner. This is such a concern that President Biden’s Fiscal Year 2025 Budget calls out this issue specifically: “Due to the ongoing impacts of the pandemic on the UI system, states have continued to struggle with addressing pending adjudications and appeals resulting from the unprecedented claims volume and continue to work to wind down the operations of the temporary pandemic-related UI programs.”
Why is this happening? There is a confluence of issues that state systems are dealing with all at once. The bulk of the problem is that the enormous damage that the pandemic wrought on state systems is hard to overstate. There are also other behavioral, funding, political, and technical reasons states aren’t making payments in a timely manner. Because this is such a complicated issue, it requires a deeper explanation.
Are state UI agencies on track to meet timeliness standards?
The U.S. Department of Labor (DOL) sets what are called Acceptable Levels of Performance for a broad range of timeliness and quality standards. A key performance standard is first payment timeliness. States are expected to pay 87 percent of first claims within fourteen to twenty-one days. States are also expected to make accurate benefit determination decisions in that time frame. There is a tension between making accurate decisions and making fast decisions. Another major factor in how fast benefits can get to claimants is how quickly appeals are decided. States must report to the DOL both the time it takes to issue appeals decisions (time lapse) and the age of all the cases they have on appeal (case aging).
While the DOL’s FY 2025 Congressional Budget Justification calls out the need to improve first payment timeliness, that is currently a bit less of an issue than appeals. National timeliness figures are not quite hitting the goal but are improving. The issue is that appeals are increasingly taking longer. (See Figures 1–2.) Figure 2 shows that while cases that take forty days or less to decide are declining as a percentage of overall cases, those that take significantly longer to decide, such as those that take 181 to 360 days or more, are increasing as a percentage of all cases.
Figure 1
Figure 2
As the author of this commentary wrote one year ago, it is critical to understand what happened in 2020 and 2021. States entered the pandemic with a fifty-year low in administrative funding. For the week ending March 7, 2020, nationwide initial claims were 211,000. Just a couple of weeks later, during the week ending March 21, initial claims had jumped to a shocking 3.3 million claims—a whopping fifteen times higher. (This claims level shattered the highest previous new claims level on record, which was 695,000 in October 1982.) Then, the following week, new claims hit 6.6 million, and the week after that, another 6.6 million claims came in. Initial claims in all unemployment programs were more than 1 million every week for more than a year.
At the same time, states had to stand up three entirely new programs that were modified by Congress over the course of the pandemic, and understanding of how to administer these programs changed over time. States did their best to interpret these new programs, but they are still sorting out errors that they made in determinations. For example, some states paid Pandemic Unemployment Assistance (PUA) to workers who were actually eligible for UI. States are still assessing overpayments in that program, and in some cases, their ineligibility for PUA was due to the fact that they should have received UI. Clearing out the pandemic caseload is still showing up in a backlogged appeals process.
Clearing out the pandemic caseload is still showing up in a backlogged appeals process.
While overall UI administrative funding has ticked up slightly over the past two years, the President Biden’s 2025 budget request makes it clear that states are still under-resourced: “as the claims filings in the regular UI program have declined to pre-pandemic levels, states are experiencing a reduction in state UI administrative funding and an accompanying reduction in staffing.” While work remains in the pipeline, states are handling it with fewer resources.
Protecting against organized criminal fraud has slowed things down
A few months into the pandemic, criminal rings began systematically stealing benefits from UI systems using data they pilfered in previous breaches of databases outside of the UI system, such as the 2017 Equifax breach. These fraudsters, many of whom are international syndicates, are still a serious threat to the UI system. For an in-depth look at how and why this fraud occurred, this publication provides in-depth detail. Because of this lingering threat, states have had to put in safeguards to prevent the theft of funds meant for unemployed workers. This essentially added significant new burdens for claimants and state agencies alike.
Fraud is a whole-of-government and whole-of-society problem that should be met with an all-hands-on-deck approach.
In response to this unprecedented level of fraud, many states have added identity verification as a step for all applicants in the application process. States are also now cross-checking with a number of databases to ensure they are not paying benefits to people who are collecting in another state, incarcerated, who went back to work, and engaging with other fraud prevention services provided through the National Association of State Workforce Association’s Integrity Data Hub. The use of these services are likely to become mandatory for states as legislation requiring their use has been proposed on a bipartisan basis in both the Senate and the House and was included in President Biden’s 2025 budget request. On top of all that, states have internal fraud flags that might trigger additional investigation and most are engaging with vendors who specialize in fraud prevention and detection.
When a claim is flagged for investigation of potential fraud, that slows down payment of that claim until the state can determine that a claimant is who they say they are and are entitled to benefits. That means that agencies are doing quite a bit more work for each claim, but their administrative funding does not reflect this significant additional workload. While $48 million over two years has been included in President Biden’s budget request for identity verification, it is doubtful that this represents all of the costs associated with fraud prevention, including staff time to verify flagged claims, subscriptions to all of the above services, and dealing with incoming inquiries from individuals whose identities were stolen and used to apply for benefits. States and claimants need significantly more resources to deal with the mess created by fraudsters. Fraud is a whole-of-government and whole-of-society problem that should be met with an all-hands-on-deck approach.
Technology issues persist as the system is modernized
None of the clunky computer systems that prevented benefits from getting out the door in 2020 have gotten any younger, and much of that infrastructure is still in place. While it is true that a few states went live with new systems amidst the height of the pandemic, that was not ideal. They had to go live with their new systems on a prescribed timeline due to funding reasons, but going live during a busy period is not recommended, let alone the most frantic period in the history of unemployment insurance. It is true that some states have made great strides since the start of the pandemic. Since the very beginning, states were getting together to share notes about how they were dealing with issues. The Department of Labor worked with states to modernize technology and pay benefits more quickly and equitably while fighting fraud. There are many things going right. However, the DOL also planned to send $600 million to states to begin the massive transformation necessary to modernize technology systems, but after half of the funding allocated to the DOL to fix UI systems was rescinded in debt ceiling negotiations, the amount being sent to states was reduced to $200 million. States still have a long way to go in order to have functional modern systems that are easy to regularly update and have the capacity to handle a crisis. On the appeals system issue, while the appeals process requires far more human involvement and is harder to automate, the place where automation may help the most—case management—is far too often a hurdle rather than a benefit since current methods of management are often clunky and cases don’t flow easily from initial denial to appeal.
Many state agencies lost key staff during the pandemic
It is hard to understate the trauma wrought by the pandemic on UI agency workers in 2020. Frontline workers in the UI system were dealing with the same uncertainty and fear as anyone, as their friends and neighbors were getting sick and dying. And in the midst of this, UI agency workers suddenly had to put in work-from-home protocols in order to spend twelve-hour workdays sheltering in terror, taking calls back to back six days a week from people who lost their jobs due to the pandemic shutdown and had just spent several hours trying to reach a live person. Some of these people were angry, some desperate. As the crisis dragged on, some callers were at the end of their financial rope and threatened the person on the other end of the line trying to help, or threatened to take their own lives. The stress of doing this work hurt UI agency workers’ relationships and families. While frontline agency workers are often incredibly caring and devoted to their work, there comes a point when the job is no longer sustainable. Because of this trauma, many workers broke down, and over half of UI agency directors resigned willingly, were forced to resign, or were openly fired.
While frontline agency workers are often incredibly caring and devoted to their work, there comes a point when the job is no longer sustainable.
Agencies face challenges training new staff
In her book about digital modernization in government, Jennifer Pahlka has a chapter titled “Seventeen Years.” The title comes from an anecdote about a UI claims processor they interviewed who kept referring to himself as “the new guy” and apologizing for not being fully up to speed on all processes. When asked how long he worked there, he said seventeen years. Not only is the law of UI incredibly complicated, but managing the technology systems that deliver UI benefits—including the myriad workarounds that have been put in place over the years—is a whole other skill set. Very often, COBOL systems consist of fixes upon fixes of code that one coder understood decades ago and newer coders try to patch around. In one state, workers said they had to have five windows open in order to process a single claim. This means that even when agencies have been able to replace the staff lost due to the stresses of the pandemic, the training process required to get them up to speed is considerable, representing a huge lag in agency capacity.
Changing claimant behavior has lengthened processing time
During the height of the pandemic, claimants who submitted a claim online often had to wait for weeks before hearing anything—including whether it had even been properly submitted—so they started relying more heavily on calling in. Handling a phone call application takes more staff time than receiving an application online. Looking at the DOL’s Benefits Accuracy Measurement data can shed some light on this behavior shift, albeit with the caveat that BAM data is a small sample size. According to those data, in 2019, 75.9 percent of initial claims were submitted online, while 19.9 percent were submitted by phone. In 2023, the percentage filing online dropped to 72 percent and phone claims increased to 23.8 percent. More claims were filed by mail in 2023, as well, increasing from 0.9 percent pre-pandemic to 1.3 percent in 2023.
Claimants also learned that contacting elected officials can help speed the process. This is a good thing—making sure that policymakers are aware of the challenges that their constituents face is a critical component of a well-functioning democracy. However, a high enough number of these escalations can create extra workload for state agencies. Ironically, an activity meant to shorten the wait can actually lengthen it.
Next steps moving forward
First, state UI agencies need more funding, full stop.
Next, it does not look like the fraud issue is going away anytime soon. Since the actors hitting UI systems are the same ones attacking other systems, widespread public/private partnerships would be an effective approach for shutting down this activity. Rather than having state agencies labor in solitude, a study of which fraud interventions have the most impact—including whether identity proofing for all claimants is creating unnecessary barriers if there might be more effective identity verification methods that can flag a smaller subset of claimants whose flags can then be cleared via identity proofing—could identify best practices for states to follow.
With regard to claimant behavior patterns, the National Association of State Workforce Agencies (NASWA) has done some great work on behavioral insights to make sure that claimants are nudged to answer questions correctly. Additional work could include making online systems more accessible and inviting and incorporating the use of technology such as the “pizza tracker” function that can help claimants follow where their claim is in the process and have confidence that it has been received and is progressing. Better case management software could be deployed in the appeals process.
Finally, states need the funding and support to fully modernize their technology systems, from the front end system that claimants use to apply for benefits through to speeding up back end processes that are invisible to users but key to getting benefits approved in a timely manner.
Tags: unemployment benefits, covid-19
States Still Challenged in Making Timely Unemployment Payments to Laid Off Workers
One of the most important features of unemployment insurance UI is the requirement in the Social Security Act that the program must be administered so that benefits can “be reasonably calculated to insure full payment of unemployment compensation when due.” The question of what it means for benefits to be paid “when due” came to the U.S. Supreme Court in 1971, and the decision in that case set a standard of paying benefits within a couple of weeks. Given that state agencies also need time to ensure accuracy in making benefit eligibility determinations, that is a pretty tight timeframe. However, workers who have experienced unexpected job loss need to get paid as soon as possible. Currently, 63 percent of workers in the United States don’t have enough savings to cover a $500 emergency expense, much less the loss of a job.
Unfortunately, nearly all states are lagging behind their pre-pandemic performance in paying benefits in a timely manner. This is such a concern that President Biden’s Fiscal Year 2025 Budget calls out this issue specifically: “Due to the ongoing impacts of the pandemic on the UI system, states have continued to struggle with addressing pending adjudications and appeals resulting from the unprecedented claims volume and continue to work to wind down the operations of the temporary pandemic-related UI programs.”
Why is this happening? There is a confluence of issues that state systems are dealing with all at once. The bulk of the problem is that the enormous damage that the pandemic wrought on state systems is hard to overstate. There are also other behavioral, funding, political, and technical reasons states aren’t making payments in a timely manner. Because this is such a complicated issue, it requires a deeper explanation.
Are state UI agencies on track to meet timeliness standards?
The U.S. Department of Labor (DOL) sets what are called Acceptable Levels of Performance for a broad range of timeliness and quality standards. A key performance standard is first payment timeliness. States are expected to pay 87 percent of first claims within fourteen to twenty-one days. States are also expected to make accurate benefit determination decisions in that time frame. There is a tension between making accurate decisions and making fast decisions. Another major factor in how fast benefits can get to claimants is how quickly appeals are decided. States must report to the DOL both the time it takes to issue appeals decisions (time lapse) and the age of all the cases they have on appeal (case aging).
While the DOL’s FY 2025 Congressional Budget Justification calls out the need to improve first payment timeliness, that is currently a bit less of an issue than appeals. National timeliness figures are not quite hitting the goal but are improving. The issue is that appeals are increasingly taking longer. (See Figures 1–2.) Figure 2 shows that while cases that take forty days or less to decide are declining as a percentage of overall cases, those that take significantly longer to decide, such as those that take 181 to 360 days or more, are increasing as a percentage of all cases.
Figure 1
Figure 2
As the author of this commentary wrote one year ago, it is critical to understand what happened in 2020 and 2021. States entered the pandemic with a fifty-year low in administrative funding. For the week ending March 7, 2020, nationwide initial claims were 211,000. Just a couple of weeks later, during the week ending March 21, initial claims had jumped to a shocking 3.3 million claims—a whopping fifteen times higher. (This claims level shattered the highest previous new claims level on record, which was 695,000 in October 1982.) Then, the following week, new claims hit 6.6 million, and the week after that, another 6.6 million claims came in. Initial claims in all unemployment programs were more than 1 million every week for more than a year.
At the same time, states had to stand up three entirely new programs that were modified by Congress over the course of the pandemic, and understanding of how to administer these programs changed over time. States did their best to interpret these new programs, but they are still sorting out errors that they made in determinations. For example, some states paid Pandemic Unemployment Assistance (PUA) to workers who were actually eligible for UI. States are still assessing overpayments in that program, and in some cases, their ineligibility for PUA was due to the fact that they should have received UI. Clearing out the pandemic caseload is still showing up in a backlogged appeals process.
While overall UI administrative funding has ticked up slightly over the past two years, the President Biden’s 2025 budget request makes it clear that states are still under-resourced: “as the claims filings in the regular UI program have declined to pre-pandemic levels, states are experiencing a reduction in state UI administrative funding and an accompanying reduction in staffing.” While work remains in the pipeline, states are handling it with fewer resources.
Protecting against organized criminal fraud has slowed things down
A few months into the pandemic, criminal rings began systematically stealing benefits from UI systems using data they pilfered in previous breaches of databases outside of the UI system, such as the 2017 Equifax breach. These fraudsters, many of whom are international syndicates, are still a serious threat to the UI system. For an in-depth look at how and why this fraud occurred, this publication provides in-depth detail. Because of this lingering threat, states have had to put in safeguards to prevent the theft of funds meant for unemployed workers. This essentially added significant new burdens for claimants and state agencies alike.
In response to this unprecedented level of fraud, many states have added identity verification as a step for all applicants in the application process. States are also now cross-checking with a number of databases to ensure they are not paying benefits to people who are collecting in another state, incarcerated, who went back to work, and engaging with other fraud prevention services provided through the National Association of State Workforce Association’s Integrity Data Hub. The use of these services are likely to become mandatory for states as legislation requiring their use has been proposed on a bipartisan basis in both the Senate and the House and was included in President Biden’s 2025 budget request. On top of all that, states have internal fraud flags that might trigger additional investigation and most are engaging with vendors who specialize in fraud prevention and detection.
Identity Verification versus Identity Proofing
Identity verification and identity proofing are not the same thing. Identity verification is confirming the claimed identity of an applicant through a number of checks that can compare information presented by the applicant with information that is held on file, such as through fingerprint identification, bank account validation, or employer validation. Identity proofing is confirming the claimed identity of an applicant by authenticating the identity source documents provided by the applicant, such as ensuring the passport they present is valid, including a hologram, and so on.
When a claim is flagged for investigation of potential fraud, that slows down payment of that claim until the state can determine that a claimant is who they say they are and are entitled to benefits. That means that agencies are doing quite a bit more work for each claim, but their administrative funding does not reflect this significant additional workload. While $48 million over two years has been included in President Biden’s budget request for identity verification, it is doubtful that this represents all of the costs associated with fraud prevention, including staff time to verify flagged claims, subscriptions to all of the above services, and dealing with incoming inquiries from individuals whose identities were stolen and used to apply for benefits. States and claimants need significantly more resources to deal with the mess created by fraudsters. Fraud is a whole-of-government and whole-of-society problem that should be met with an all-hands-on-deck approach.
Technology issues persist as the system is modernized
None of the clunky computer systems that prevented benefits from getting out the door in 2020 have gotten any younger, and much of that infrastructure is still in place. While it is true that a few states went live with new systems amidst the height of the pandemic, that was not ideal. They had to go live with their new systems on a prescribed timeline due to funding reasons, but going live during a busy period is not recommended, let alone the most frantic period in the history of unemployment insurance. It is true that some states have made great strides since the start of the pandemic. Since the very beginning, states were getting together to share notes about how they were dealing with issues. The Department of Labor worked with states to modernize technology and pay benefits more quickly and equitably while fighting fraud. There are many things going right. However, the DOL also planned to send $600 million to states to begin the massive transformation necessary to modernize technology systems, but after half of the funding allocated to the DOL to fix UI systems was rescinded in debt ceiling negotiations, the amount being sent to states was reduced to $200 million. States still have a long way to go in order to have functional modern systems that are easy to regularly update and have the capacity to handle a crisis. On the appeals system issue, while the appeals process requires far more human involvement and is harder to automate, the place where automation may help the most—case management—is far too often a hurdle rather than a benefit since current methods of management are often clunky and cases don’t flow easily from initial denial to appeal.
Many state agencies lost key staff during the pandemic
It is hard to understate the trauma wrought by the pandemic on UI agency workers in 2020. Frontline workers in the UI system were dealing with the same uncertainty and fear as anyone, as their friends and neighbors were getting sick and dying. And in the midst of this, UI agency workers suddenly had to put in work-from-home protocols in order to spend twelve-hour workdays sheltering in terror, taking calls back to back six days a week from people who lost their jobs due to the pandemic shutdown and had just spent several hours trying to reach a live person. Some of these people were angry, some desperate. As the crisis dragged on, some callers were at the end of their financial rope and threatened the person on the other end of the line trying to help, or threatened to take their own lives. The stress of doing this work hurt UI agency workers’ relationships and families. While frontline agency workers are often incredibly caring and devoted to their work, there comes a point when the job is no longer sustainable. Because of this trauma, many workers broke down, and over half of UI agency directors resigned willingly, were forced to resign, or were openly fired.
Agencies face challenges training new staff
In her book about digital modernization in government, Jennifer Pahlka has a chapter titled “Seventeen Years.” The title comes from an anecdote about a UI claims processor they interviewed who kept referring to himself as “the new guy” and apologizing for not being fully up to speed on all processes. When asked how long he worked there, he said seventeen years.1 Not only is the law of UI incredibly complicated, but managing the technology systems that deliver UI benefits—including the myriad workarounds that have been put in place over the years—is a whole other skill set. Very often, COBOL systems consist of fixes upon fixes of code that one coder understood decades ago and newer coders try to patch around. In one state, workers said they had to have five windows open in order to process a single claim. This means that even when agencies have been able to replace the staff lost due to the stresses of the pandemic, the training process required to get them up to speed is considerable, representing a huge lag in agency capacity.
Changing claimant behavior has lengthened processing time
During the height of the pandemic, claimants who submitted a claim online often had to wait for weeks before hearing anything—including whether it had even been properly submitted—so they started relying more heavily on calling in. Handling a phone call application takes more staff time than receiving an application online. Looking at the DOL’s Benefits Accuracy Measurement data can shed some light on this behavior shift, albeit with the caveat that BAM data is a small sample size. According to those data, in 2019, 75.9 percent of initial claims were submitted online, while 19.9 percent were submitted by phone. In 2023, the percentage filing online dropped to 72 percent and phone claims increased to 23.8 percent. More claims were filed by mail in 2023, as well, increasing from 0.9 percent pre-pandemic to 1.3 percent in 2023.
Claimants also learned that contacting elected officials can help speed the process. This is a good thing—making sure that policymakers are aware of the challenges that their constituents face is a critical component of a well-functioning democracy. However, a high enough number of these escalations can create extra workload for state agencies. Ironically, an activity meant to shorten the wait can actually lengthen it.
Next steps moving forward
First, state UI agencies need more funding, full stop.
Next, it does not look like the fraud issue is going away anytime soon. Since the actors hitting UI systems are the same ones attacking other systems, widespread public/private partnerships would be an effective approach for shutting down this activity. Rather than having state agencies labor in solitude, a study of which fraud interventions have the most impact—including whether identity proofing for all claimants is creating unnecessary barriers if there might be more effective identity verification methods that can flag a smaller subset of claimants whose flags can then be cleared via identity proofing—could identify best practices for states to follow.
With regard to claimant behavior patterns, the National Association of State Workforce Agencies (NASWA) has done some great work on behavioral insights to make sure that claimants are nudged to answer questions correctly. Additional work could include making online systems more accessible and inviting and incorporating the use of technology such as the “pizza tracker” function that can help claimants follow where their claim is in the process and have confidence that it has been received and is progressing. Better case management software could be deployed in the appeals process.
Finally, states need the funding and support to fully modernize their technology systems, from the front end system that claimants use to apply for benefits through to speeding up back end processes that are invisible to users but key to getting benefits approved in a timely manner.
Notes
Tags: unemployment benefits, covid-19