2010 National UI Integrity Professional Development Conference Improper

2010 National UI Integrity Professional Development Conference Improper Payments Panel Discussion April 20, 2010 Dale Ziegler Deputy Administrator Office of Unemployment Insurance

UI Improper Payments & Integrity Efforts are Mature n 1940’s Basic Controls Created n 1950’s ¨ Standard for Fraud and Overpayment Detection issue ¨ BPC Branch created within OUI n 1970’s Quality Appraisal Started n 1980’s Random Audit & Benefit Quality Control n 1990’s Benefit Accuracy Measurement n 2000’s Denied Claims Accuracy

Improper Payments by Major Program

Executive Order 13520 UI Supplemental Measures n OMB guidance requires agencies with highpriority programs to develop new measures with semi-annual targets that: Ø Focus on high risk areas within the highpriority program, for example components of the annual rate. Ø Identify root causes of error that agencies can fix through corrective actions.

UI Supplemental Measures Targets Measure FY 2010 FY 2011 FY 2012 Operational 5. 1% 5. 0% 4. 8% ES Registration 1. 15% 1. 0% 0. 9%

Causes of UI Overpayments

Distribution of BYE Overpayments

Benefit Year Earnings Discussion: n. Identify the causes for these errors n. Develop short-term solutions Develop canned messages for use on the state web site or telephone filing system to inform claimants that once they have returned to work they are no longer eligible to receive UI. Ø Other communication vehicles Ø

State Information Data Exchange System To reduce improper payments due to separation issues n 6 states facilitated the implementation of State Information Data Exchange System (SIDES) -- an automated employer response system to standardize the collection of information on employee separations from employers and third-party administrators. n SIDES in production as of January, 2010 n Currently, UT and ADP are using SIDES

SIDES Web Services and Website

SIDES Exchange Formats n Additional Formats Under Consideration: Wage Verification (two way communication) Ø Monetary Determination Ø Benefit Chargeback Notice Ø Nonmonetary Determination Ø Appeal Decision Ø Others…. (File an Appeal, Appeal a Charge, submit Wage Records) Ø

ES Registration Errors n ES registration errors accounted for nearly 15 percent of total overpayments nationally ($835 million) in FY 2009, these errors are concentrated in a handful of states. n This cause is a controllable source of improper payments. Target the few states that account for over two-thirds of total overpayments attributable to ES registration.

Root Causes of ES Registration Errors n The leading causes of ES registration errors are: Ø Inadequate communication of registration requirements to claimants. Ø Technical issues in registering UI claimants in ES management information systems.

ES Registration Error Rates ST Pct of $ Paid -- -----LA 19. 45% IN 17. 20% NM 16. 29% SC 13. 58% AL 6. 58% TN 4. 62% AK 4. 42% NE 3. 86% MS 3. 20% WV 3. 18% Pct of $ OP -----48. 42% 57. 39% 63. 51% 69. 08% 48. 11% 43. 96% 35. 92% 27. 72% 25. 25% 42. 74% Est. Amount ------$75, 930, 910 $318, 511, 398 $49, 624, 064 $120, 670, 928 $41, 208, 100 $44, 001, 106 $7, 064, 495 $6, 663, 067 $9, 766, 005 $9, 560, 299

Supplemental Budget Requests (SBRs) n $10 Million - IT Integrity Projects ¨ n Focus on Root Causes of Overpayments (example: SIDES) $9 Million - Performance Improvement Projects ¨ Focus on Core Measures, Data Validation n Matching Funds for Projects n Guidance (UIPL) issuance in May, 2010

Proposed Integrity Act n States to use a small % of UC overpayment and delinquent contributions to prevent/detect/recover improper payments and misclassification/delinquent employer contributions. n Penalties due to claimant fraud. n Employers required to report start date of new hires to NDNH. n Expands use of TOP for certain non-fraud overpayments n Prohibits non-charging under certain circumstances.

Treasury Offset Program (TOP) n Federal law was amended in 2008 to permit states to recover certain UC debts due to fraud from Federal income tax refunds under the Treasury Offset Program (TOP). n OUI explored the possibility of contracting for TOP services from other federal agencies.

Treasury Offset Program (TOP) n Department of Treasury informed OUI that Treasury’s TOP system can be used by states for the recovery of UC debts. n OUI will provide additional guidance to the states regarding the TOP implementation in June 2010. n Goal for first states to begin in December 2010.

Questions?