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Arizona posted nation’s lowest rate of improper unemployment payments

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WASHINGTON – Arizona had the lowest rate of improper unemployment insurance payments in the nation last year, a ranking that one official said reflects the benefits of new initiatives introduced in the last two years.

The U.S. Labor Department estimated that Arizona issued about $5.3 million worth of improper payments – the sum of benefit overpayments and underpayments, minus overpayments the state has recovered – between July 2012 and June 2013. That was just 1.5 percent of the total $368.1 million the state issued in unemployment benefits during that time, the lowest rating among 50 states and the District of Columbia.

It’s a big improvement from two years ago when Arizona had one of the highest improper payment rates in the nation, according to Mark Darmer, deputy director of programs for the state’s Department of Economic Security. The U.S. Labor Department had put Arizona’s rate at 20 percent then, he said, but new programs have brought the rate down.

“We took that very seriously,” Darmer said. “We put in place several quality initiatives within the unemployment insurance program here in the department to bring down that improper payment rate.”

Those initiatives, he said, include working with the Department of Corrections to see if inmates are filing claims, using national and state directories of new hires to see if people continue to collect benefits after getting jobs and aggressively pursuing tax returns to ensure that people have made accurate claims.

Businesses have also worked with the state in creating new rules and pushing for accuracy in benefits. Chad Heinrich, vice president of public affairs and economic development for the Greater Phoenix Chamber of Commerce, said business has a vested interest in ensuring proper payments because businesses fund the insurance system.

“If the costs of the system increase, those costs are borne by the business community,” Heinrich said.

Though Arizona ranked low for its improper payment rates, the Labor Department estimated that about 5.9 percent of those payments resulted from fraud, the fourth-highest rate in the country.

A low improper payment rate and a high fraud rate are not mutually exclusive, said Burt Barnow, a labor economics expert at George Washington University. The former results from honest mistakes by both the state and people seeking insurance, he said, while the latter is intentional deception by those making claims.

The three officials agreed that it’s in everyone’s interest to make sure payments are as accurate as possible.

“If the general public are confident in the job that we’re doing,” Darmer said, “then they have faith and confidence that their tax dollars and those of the employers that they work for are being appropriately safeguarded by the department.”

Businesses would have a healthier trust fund and pay lower insurance premiums if overpayments are reduced, Heinrich said. And lower fraud rates would not only make people more confident in the system, Barnow said, they would also head off the possibility of higher unemployment insurance premiums being passed on to workers.

“Everybody has an interest in keeping fraud down because it’s just not right and it’s not equitable, and secondly it just raises costs to the system,” Barnow said.

The largest cause of fraudulent payments in Arizona is people who continue to collect benefits even after finding jobs, Darmer said. The DES is trying to crack down on this kind of fraud by encouraging employers to increase the number of new-hire reports and speed up those reports.

“The sooner we get hold of that new data and learn of that new hire, the quicker we can do our cross-match to make sure that those individuals aren’t able to continue to collect benefits,” he said.