Fraudsters rip off California’s disability insurance system

January 19, 2022

By JOSH FRIEDMAN

After acknowledging mass unemployment fraud amid the COVID-19 pandemic, the state of California is now faced with tens or hundreds of thousands of fraudulent disability insurance claims.

On Friday, the California Employment Development Department (EDD) announced it had frozen 345,000 disability insurance claims. The claims were associated with 27,000 suspicious medical provider registrants, whose accounts the EDD also suspended. The majority of the claims and medical provider registrations were likely fraud attempts, the EDD stated in a press release.

In recent weeks, the EDD has tried to crack down on a disability insurance identity theft scam involving suspected elements of organized crime filing fraudulent claims. The fraudsters have been using identifying information stolen from individuals and medical or health providers.

“While the majority of these providers and claims were likely fraud attempts, the department has partnered with state regulators and medical provider organizations to coordinate the verification process to clear any legitimate claims as quickly as possible,” the EDD stated. “This is the EDD’s top priority. That includes working to contact all claimants who have had their claim held up in this identify theft scam.”

Disability claimants deemed unassociated with the scam attempts have continued to receive payments.

In October, state officials acknowledged having given at least $20 billion in unemployment funds to criminals since the start of the coronavirus pandemic. As part of the $20 billion given to fraudsters, state officials approved at least $810 million in benefits in the names of prison inmates, including dozens of infamous killers on death row. State officials also sent $21,000 in benefits to an address in Roseville under the name and social security number of Sen. Dianne Feinstein, which accounts for a small portion of the $2 million in fraudulent payments sent to that same address.

State officials blamed almost all of the fraud on a hastily approved expansion of unemployment benefits by Congress, which allowed self-employed workers to receive weekly checks from the government with few safeguards preventing individuals who were not eligible from receiving them.

Currently, the EDD says it has sent 1.4 million notices to pandemic unemployment benefits recipients instructing them to submit documents proving employment or self-employment, as required by federal law. Fewer than 20 percent of recipients have responded so far, with more than 90 percent of those individuals being found eligible. Those found ineligible will receive notices awarding them an opportunity to appeal and submit additional documentation.