Some disabled workers could get caught in the crossfire as California’s Employment Development Department battles a new wave of fraudsters.
EDD has frozen 345,000 claims for disability insurance because of “suspected organized criminal elements filing false (disability insurance) claims using stolen credentials of individuals and medical or health providers,” it said in a statement Thursday.
Disability insurance covers temporary conditions, such as pregnancy, COVID-19, disease or injury, that preclude someone from working. Applicants must include certification from a medical provider that they have a medical issue.
EDD said last month that it had seen an unusual increase in entities registering as new medical or health providers along with a rise in disability claims, leading it to suspect that criminals are trying to hijack money, in the same way they stole billions over the past two years from unemployment insurance, which is also administered by EDD.
The suspended accounts are associated with 27,000 suspicious medical providers, EDD said. It said it is working with regulators and medical provider groups to quickly verify which claims are legitimate, and is contacting all claimants whose accounts were frozen.
But advocates are concerned that workers who are legitimately ill are having the disability payments they need cut off.
“We have heard from applicants whose claims have been frozen as a part of this,” said Katherine Wutchiett, staff attorney with Legal Aid at Work, a San Francisco nonprofit that helps low-income workers. “We’re deeply concerned because disability insurance is such an important lifeline for people at a time of crisis. It allows them to take leave to heal.”
She fears that people whose benefits were frozen will return to work before they are ready, thus risking their health. For instance, some clients are continuing to work very late in their pregnancies even though they are uncomfortable and their doctors recommended they go on disability leave, she said.
People returning to work too early because they can’t get disability income can also risk public health, Wutchiett said. The obvious case in point is workers infected with COVID-19.
While EDD said it is working quickly to identify and unfreeze legitimate accounts, that doesn’t help disabled workers meet their immediate expenses.
“For workers who don’t have extensive savings, the promise of potential benefits months out isn’t enough for them to feel safe taking time off from work,” Wutchiett said.
State disability insurance is entirely worker-funded via withholding 1.2% of pay. Most disabled workers receive 60% of their income for up to 52 weeks; very low-income workers can receive 70%.
EDD is requiring medical providers to verify their identities using its ID.me vendor. Any vetting requests from it will come from an email ending in @edd.ca.gov.
People who receive correspondence from EDD about a claim that they did not file can submit a fraud report at Ask EDD. They can also file an identity theft report with the Federal Trade Commission.
EDD, which struggled with a tsunami of unemployment claims from people laid off during the pandemic, said it lost between $11 billion and $31 billion to fraudsters, who included organized criminals and gangs of prison inmates.
A year ago, EDD froze 1.4 million unemployment accounts in an effort to combat fraud. Claimants had to verify their identities through ID.me, but the system got bogged down by the huge volume, and many legitimately unemployed people were left with no income for weeks on end.
This summer, EDD said it would no longer freeze unemployment benefits for people whose existing claims had eligibility issues, but instead would pay them while investigating problems.