This summer, Senators Mike Crapo (R-ID) and Ron Wyden (D-OR) introduced the Unemployment Insurance Integrity and Accessibility Act, a bill aimed at elevating aspects of unemployment insurance (UI) administration. The proposed legislation includes reforms that enable greater pursuit of benefit fraud, provide states greater flexibility to waive non-fraudulent pandemic overpayments, and codify accessibility requirements into federal law.
Most importantly, the bill includes provisions to ensure that states fully utilize all available national data verification systems. In early 2020, only a fraction of UI agencies were using key data systems when processing claims, which significantly contributed to states’ difficulties in detecting fraud and preventing improper payments during the pandemic. System usage rates have since increased, but gaps remain that this bill will help close.
Core data requirements
The bill requires state UI agencies to establish procedures to crossmatch claimants against the National Directory for New Hires (NDNH) and the Social Security Administration’s Prisoner Update Processing System (PUPS), “or such other repositories of information.” The NDNH enables agencies to determine if claimants have secured employment since the previous week, while PUPS helps prevent benefits from going to ineligible individuals in prison.
Although less explicit, the Department of Labor (DOL) would gain the authority to enforce the use of the State Information Data Exchange System (SIDES) and the Integrity Data Hub (IDH). SIDES can be used to verify applicants’ earnings through data shared by employers, while the IDH helps states detect if applicants have filed claims in multiple states simultaneously, among other integrity checks. The language in the bill does not prescribe exactly how the databases are used, giving state agencies and the DOL flexibility to determine best practices.
Catching potential claimants applying across multiple states or from prison may seem straightforward, but these were types of fraud that states struggled to prevent during the pandemic. When the Department of Labor Office of Inspector General analyzed tens of billions of dollars in suspected fraudulent claims, it found that multi-state claimants were a particularly large share. To prevent similar fraud in the future, it is crucial that state agencies consistently utilize these verification systems.
Notably, the Crapo-Wyden bill ensures that the cross-matching requirements include databases added in the future (emphasis added):
‘‘The State agency charged with administration of the State law shall use the system designated by the Secretary of Labor for cross-matching claimants of unemployment compensation under State law against any databases in the system to prevent and detect fraud and improper payments.’’
This provision is particularly useful for two crucial reasons. First, it could help ensure states adopt new databases more quickly. Department of Labor officials have pointed out that “only three states were using the IDH’s relatively new Multi-State Cross-Match (MSCM) functionality in March of 2020.” Had this database been more widely adopted, UI agencies would have been better equipped to limit one of the most prevalent types of fraud during the pandemic.
Second, state UI agencies struggle with eligibility considerations that the existing databases cannot fully resolve. During crises like Covid-19 or natural disasters such as hurricanes, workers typically ineligible for UI—like the self-employed and many gig economy workers— can qualify for emergency benefits. Verifying their income is difficult without access to IRS return data, which other agencies are allowed to use. If IRS data were approved for inclusion in the Integrity Data Hub – similar to the collaboration between Centers for Medicare & Medicaid Services and the IRS – more reliable and efficient eligibility checks could be conducted. The Crapo-Wyden bill could ensure that all UI agencies utilize this service if it were added.
Practice makes perfect
Congress should work to pass the Crapo-Wyden bill as soon as possible. Strong economic times are ideal for upgrading administration. Claims are relatively low and agencies have more capacity to focus on improving their efficiency and processes. Implementing integrity measures during a crisis is far more difficult, as agencies face a tradeoff between timely payments and fraud prevention. By acting now, Congress can ensure that state agencies avoid these challenges in future emergencies by proactively scaling up their verification processes.