Calendar Year 2002 Benefit Accuracy Measurement Data Summary
Calendar Year 2002 Benefit Accuracy Measurement Data Summary
The Benefit Accuracy Measurement (BAM) program is designed to determine the accuracy of paid and denied claims in three major Unemployment Insurance (UI) programs: State UI, Unemployment Compensation for Federal Employees (UCFE), and Unemployment Compensation for Ex-Servicemembers (UCX). State Workforce Agencies select weekly random samples of UI payments and denied claims. BAM investigators audit these paid and denied claims to determine if the claimant was properly paid or denied eligibility. Because BAM is based on a statistical sample, BAM program results are used to estimate accuracy rates for the populations of paid and denied claims.
Calendar year (CY) 2002 BAM paid claims results are based on the 23,868 sample cases completed by April 30, 2003, the date by which states were required to complete all CY 2002 BAM cases. This represents a completion rate of nearly 99 percent. UI benefit payments included in BAM in CY 2002 increased to $40.4 billion, compared with $29.9 billion in CY 2001.
No single measure can reflect all aspects of UI benefit payment integrity. Four analytical measures are summarized in the following chart.
BAM Annual Report Rate (9.1%) - The Annual Report rate includes fraud, nonfraud recoverable overpayments, nonfraud nonrecoverable overpayments, official action taken to reduce future benefits, and payments that are technically proper due to finality or other rules. All causes and responsible parties and are included in this rate.
BAM GPRA Operational Rate (5.0%) - For Fiscal Year 2002, the Employment and Training Administration defined four UI goals for the Government Performance and Results Act (GPRA) that reflect the UI program’s benefit payment, tax, and reemployment facilitation responsibilities. The measure for one of the goals, Improve Payment Accuracy for Unemployed Workers, is the amount of overpayments actually established through state Benefit Payment Control (BPC) operations as a percent of the amount the BAM program estimates states can detect and establish for recovery through BPC operations. The BAM estimate is an "operational overpayment rate", which includes those overpayments that the states can be reasonably expected to detect and establish for recovery -- fraud and nonfraud recoverable overpayments, excluding work search, employment service registration, base period wage issues and miscellaneous causes, such as benefits paid during a period of disqualification, redeterminations, and back pay awards.
Agency Responsibility (2.8%) - This rate includes overpayments for which the state agency was either solely responsible or shared responsibility with claimants, employers, or third parties, such as labor unions or private employment referral agencies. The rate includes fraud, nonfraud recoverable overpayments, nonfraud nonrecoverable overpayments, official action taken to reduce future benefits, and payments that are technically proper due to finality or other rules.
Fraud (2.2%) - The definition of unemployment compensation fraud varies from state to state. The rate includes all causes and responsible parties.
BAM Annual Report Rate In Detail
The following sections discuss the Annual Report overpayment rate in detail, including overpayment causes, responsibility, state agency action, and rate changes. The Annual Report rate has been published since the beginning of the program in CY 1988. These estimated overpayment rates are summarized in the following chart.
State Annual Report Overpayment Rates
| State | CY 2002 Overpayment Rate |
Change From CY 2001 (Percentage Pts.) |
Leading Cause (Percent of UI Benefits Paid) |
|---|---|---|---|
| Virginia | 23.51% | +1.33 | Work Search (12.15%) |
| Texas | 20.71% | +6.37 | Work Search (7.72%) |
| Louisiana | 20.43% | +9.10 | Benefit Year Earnings (6.11%) |
| Montana | 19.35% | +4.86 | ES Registration (8.82%) |
| Nebraska | 17.68% | +5.72 | ES Registration (8.53%) |
| State | CY 2002 Overpayment Rate |
Change From CY 2001 (Percentage Pts.) |
Leading Cause (Percent of UI Benefits Paid) |
|---|---|---|---|
| Vermont | 1.71% | -3.84 | Benefit Year Earnings (0.72%) |
| Massachusetts | 2.40% | -0.53 | Benefit Year Earnings (1.62%) |
| Oklahoma | 2.91% | -1.52 | Work Search (1.78%) |
| West Virginia | 3.21% | +0.38 | Benefit Year Earnings (2.12%) |
| North Dakota | 3.25% | +1.30 | Separation Issues (1.59%) |
| State | Amount Paid (in millions) |
OP Rate (Percentage Pt. Change from CY 2001) |
State | Amount Paid (in millions) |
OP Rate (Percentage Pt. Change from CY 2001) |
|---|---|---|---|---|---|
| California | $5,451.4 | 7.25% (+1.61) | New Jersey | $2,081.5 | 8.20% (-3.40) |
| New York | $3,204.1 | 8.11% (+3.32) | Massachusetts | $1,920.7 | 2.40% (-0.53) |
| Illinois | $2,516.7 | 7.82% (-3.67) | Michigan | $1,778.3 | 8.17% (+0.16) |
| Pennsylvania | $2,209.5 | 8.15% (-1.44) | Washington | $1,693.1 | 12.24% (+1.34) |
| Texas | $2,200.0 | 20.71% (+6.37) | Ohio | $1,423.8 | 6.93% (-0.76) |
Readers are strongly cautioned that it may be misleading to compare one state's payment accuracy rates with another state’s rates. No two states' written laws, regulations, and policies specifying eligibility conditions are identical, and differences in these conditions influence the potential for error. States with stringent or complex provisions tend to have higher improper payment rates than those with simpler, more straightforward provisions.
Changes in Annual Report Overpayment Rates
The estimated CY 2002 overpayment rate of 9.10 percent of benefits paid in the State UI, UCFE, and UCX programs is an increase of 0.91 percentage points from CY 2001. An estimated $3.68 billion of benefits were overpaid in CY 2002, compared with $2.45 billion overpaid in CY 2001. Most of the national increase in the overpayment rate is attributable to increases in the percentages of UI benefits that were overpaid due to separation, able and available, and other eligibility issues, which include work refusals, self-employment, and illegal alien status.
| Overpayment Cause | CY 2002 Percentage of UI Benefits Paid |
Percentage Point Change From CY 2001 |
|---|---|---|
| Benefit Year Earnings | 2.48% | -0.08 |
| Separation Issues | 1.98% | +0.25 |
| Work Search | 1.43% | +0.18 |
| ES Registration Issues | 0.83% | +0.13 |
| Able & Available | 0.78% | +0.22 |
| Base Period Wage Issues | 0.65% | -0.02 |
| Other Eligibility Issues* | 0.61% | +0.26 |
| Dependents and Other Issues | 0.34% | -0.03 |
In CY 2002, 29 State Workforce Agencies (SWAs) reported increases in their overpayment rates from the previous year, and 21 SWAs reported decreases in their overpayment rates. (Colorado and Puerto Rico did not complete a sufficient number of cases in CY 2001 to produce statistically reliable estimates and are excluded from the CY 2001 - 2002 comparison.)
| State | Percentage Point Increase From CY 2001 |
Leading Cause of Increase (Percentage Point Increase) |
|---|---|---|
| Louisiana | 9.10 | ES Registration (+3.66) |
| Texas | 6.37 | Work Search (+3.67) |
| Nebraska | 5.72 | ES Registration (+7.17) |
| Montana | 4.86 | Work Search (+2.80) |
| Iowa | 4.15 | Separation Issues (+2.70) |
| State | Percentage Point Decrease From CY 2001 |
Leading Cause of Decrease (Percentage Point Decrease) |
|---|---|---|
| Mississippi | -8.65 | ES Registration (-10.74) |
| Maine | -6.55 | Other Eligibility Issues (-4.08) |
| Utah | -4.41 | Benefit Year Earnings (-3.83) |
| Vermont | -3.84 | Separation Issues (-1.30) |
| Illinois | -3.67 | Work Search (-1.64) |
Overpayment Cause Trends Over the last ten years, benefit year earnings (unreported or erroneously reported benefit year earnings, plus social security, pension, or severance/vacation pay) have accounted for the largest portion of overpayments. In recent years, separation issues have been the second leading cause of overpayments, followed by work search issues. The percentage of UI benefits that were overpaid because of errors in reporting or recording base period wage issues has decreased slightly in recent years as the automation of wage reporting has improved.
Causes of Overpayments in CY 2002
The leading cause of overpayment errors in CY 2002 was unreported or erroneously reported benefit year earnings and income, including social security, pension, severance or vacation pay, which accounted for over one-fourth of the $3.68 billion overpaid and 2.5 percent of the $40.4 billion in UI benefits paid in CY 2002. Separation issues were the second leading cause of overpayments, accounting for 22 percent of the amount overpaid and 2.0 percent of benefits paid.
Leading Cause of Overpayments by State
Unreported or erroneously reported benefit year earnings and income, including social security, pension, severance, or vacation pay were the leading cause of overpayment errors in nearly half of the states. Work search issues were the leading cause in 11 states, and separation issues were the principal cause of overpayment errors in 10 states. Employment service registration issues were the leading cause of overpayments in eight states.
Benefit Year Earnings and Income
The leading cause of UI overpayments, benefit year earnings and income, comprises several issues. The adjacent chart summarizes the distribution of the $1 billion of overpayments attributable to benefit year earnings and income issues. The largest component by far (64 percent) is unreported earnings by UI claimants who have returned to work but continue to collect UI benefits. Incorrectly reported earnings or time worked account for 21 percent of the total.
Responsibility for Overpayments in CY 2002
Claimants alone were responsible for nearly 60 percent of the dollars overpaid; claimant responsibility accounted for overpayments representing 5.4 percent of total UI benefits paid in CY 2002. Errors resulting in overpayments that were attributed exclusively to the state agency accounted for 15 percent of the amount overpaid and represented 1.3 percent of the UI benefits paid. The category “All Other” includes overpayments for which more than one party has responsibility, such as claimants and employers or agency and employers, as well as third parties.
Recoverable and Detectable Overpayments
In addition to cause and responsibility, BAM classifies all UI payment errors according to type of error (fraud, nonfraud recoverable, and nonfraud nonrecoverable) and agency action prior to the date that BAM selects the UI payment for investigation. For many errors, such as work search and able and available issues, the disqualifying issue was not detectable through the normal claims processing procedures. In the case of work search, for example, it is not cost effective for the agency to verify the work search efforts of all claimants. The adjacent chart displays the distribution of the $3.68 billion of UI overpayments classified by four characteristics -- recoverable and detectable, recoverable and nondetectable, nonrecoverable and detectable, and nonrecoverable and nondetectable.
While over three-fourths of the amount of benefits
that were overpaid is recoverable, over 70 percent
of all UI overpayments are not detectable through normal agency procedures. For nearly one-fourth of the
overpayments, the agency had sufficient information to identify the overpayment issue but did not resolve
the issue (12 percent), did not follow procedures (6 percent), or took the incorrect action (6 percent).
The agency had resolved or was in the process of resolving only 3 percent of the overpayments at the time
BAM selected the sample.
Cause By Type of Overpayment
The distribution of overpayment cause varies considerably by type of error. Nearly half of the $872 million in overpayments classified as fraud are due to benefit year earnings and income. Nearly a quarter of the fraud overpayments are attributable to separation issues. Able and available (A & A) issues are the third largest component (12 percent).
Nonfraud overpayments that are recoverable totaled nearly $1.9 billion. Work search issues, benefit year earnings, and separation issues collectively account for nearly three-fourths of the nonfraud recoverable overpayments.
Employment service registration issues make up 35 percent of the $903 million in nonfraud nonrecoverable overpayments. Separation issues account for a little over 25 percent of the total. Many of these overpayments are unrecoverable because the claimant was not responsible for the error. For example, the agency failed to enter or maintain the claimant’s registration in the employment service records system or, in the case of separation errors, the employer did not provide information requested by the agency concerning the claimant’s separation when the claim was filed. Other overpayments cannot be recovered because of finality rules, which preclude recovery of erroneous payments after a specified period of time.
Average Amount Overpaid
Another approach to measuring UI benefit payment integrity is to examine the average amount overpaid. The following chart displays the average overpayments per erroneous payment and per an appropriate workload measure. Overpayment errors are classified by cause: monetary (base period wage and dependents allowance issues), separation (voluntary quit and discharge), and nonmonetary / nonseparation (benefit year earnings and income, able and available, work search, ES registration, refusal of work, alien status, and other continuing eligibility issues). The workload measures used in computing the average overpayments are summarized in the following table.
| Cause | Workload Measure | CY 2002 |
|---|---|---|
| Monetary | Number of first payments | 10,179,839 |
| Separation | Number of first payments + Number of additional claims, excluding ACs for which a nonmonetary determination resulted in a denial | 16,917,263 |
| Nonseparation | Number of UI weeks paid | 168,581,824 |
Monetary overpayments average approximately $35 per erroneous payment. These errors generally represent a reduction of the claimant’s weekly benefit amount due to erroneously reported or recorded base period wages. However, most of these claimants remain eligible for some UI benefits. In contrast, separation overpayments often involve complete disqualification (due mostly to voluntary quits and discharges), resulting in an average overpayment of nearly $220 per erroneous payment. Nonseparation errors average $160 per overpayment and encompass several issues. Some of these, such as able and available and work search violations, result in total disqualification for the compensated week of unemployment, whereas other issues, such as earnings from part-time employment or income from social security or pensions result in a partial reduction of benefits for the week of unemployment that is affected.
The average overpayments per workload are computed by dividing the amount of benefits overpaid in each cause category by the appropriate workload measure. For example, BAM estimates that approximately $287 million were overpaid due to monetary issues. Dividing this amount by the 10,179,839 first payments results in an average overpayment of approximately $28. Average overpayments per workload for separation and nonseparation errors are significantly smaller than the average amount per overpayment. For example, dividing total overpayments due to separation issues ($798 million) by the nearly 17 million first payments and eligible additional claims* produces an average overpayment of $47. Nonseparation overpayments, which comprise issues related to the claimant’s continued eligibility during his or her benefit year (for example, benefit year earnings, able and available, and work search issues) totaled $2.6 billion, an average of $15 per UI week paid. These workload averages place overpayments in the context of the number of transactions and eligibility determinations made in the UI system.
Underpayment Rates
BAM estimates that $268.5 million were underpaid in CY 2002, compared with $184.4 million in CY 2001. As a percentage of UI benefits paid, the CY 2002 national underpayment rate of 0.66 percent is essentially unchanged from CY 2001. The underpayment rate decreased in 25 of the SWAs in CY 2002, and increased in 25 SWAs.
| States With Highest UP Rates |
CY 2002 UP Rate (Percentage Point Change from 2001) |
States With Lowest UP Rates |
CY 2002 UP Rate (Percentage Point Change from 2001) |
|---|---|---|---|
| Massachusetts | 1.92% (+0.51) | Idaho | 0.11% (-0.55) |
| Puerto Rico | 1.88% (*) | Indiana | 0.11% (-0.15) |
| Iowa | 1.45% (+0.29) | North Dakota | 0.13%(-0.23) |
| Louisiana | 1.26% (-0.33) | Nevada | 0.14% (-0.08) |
| New Jersey | 1.01% (-1.10) | Maryland Texas |
0.15% (-0.12) 0.15%(+0.02) |
Errors in reporting or recording base period wages accounted for nearly two-thirds of the amount underpaid and represented 0.44 percent of the amount of UI benefits paid in CY 2002.
Employers alone were responsible for 40 percent of the amount underpaid, which represented 0.26 percent of the amount of UI benefits paid. Claimants alone were responsible for an additional 23 percent of the amount underpaid, which represented 0.16 percent of the amount of UI benefits paid.
II. Denied Claims Accuracy (DCA)
The underpayments estimated from BAM paid claims samples represent underpayments only for those claimants eligible for unemployment compensation (UC). Underpayments also result when claims for UC are erroneously denied. BAM units in the State Workforce Agencies began selecting samples of denied UC claims in August 2001. CY 2002 is the first complete year for which BAM DCA data are available.
CY 2002 DCA cases have not yet been reviewed by Regional and National Office monitors to verify the accuracy of the state audits. Monitoring will begin in CY 2003. If DCA data are revised as a result of the case reviews, the Department of Labor will publish the revised results. In addition, in several states the population from which the BAM DCA samples were selected may not include all of the determinations that meet the definition for inclusion in the DCA population. This limits the degree to which inferences about the population can be made from BAM DCA data. States are in the process of resolving these population issues.
| Denial Type | Population | Sample | CY 2002 Improper Rate * |
CY 2002 Adjusted Improper Rate # |
|---|---|---|---|---|
| Monetary | 833,863 | 6,917 | 14.69% | 9.38% |
| Separation | 1,588,829 | 7,034 | 7.62% | 5.71% |
| Nonseparation | 1,503,906 | 6,980 | 11.79% | 9.23% |
Notes:
Data exclude California, which requested and was given permission by the Department of Labor to suspend DCA sampling and investigation for a significant portion of CY 2002, and Arkansas and Colorado, which did not complete a sufficient number of cases to produce statistically reliable accuracy rate estimates.
Responsibility
The party responsible for erroneous denials varies by type of determination. Employers are solely responsible for 45 percent of the erroneous monetary denials due to misreporting or underreporting employees’ wages. Employers together with claimants or the state agencies are responsible for 15 percent of the erroneous monetary denials.
The state agencies are responsible for the 54 percent of the incorrect separation denials and 46 percent of the improper nonseparation denials. Employers and the state agencies are jointly responsible for 16 percent of the erroneous separation denials. Claimants are responsible for approximately 22 percent of the erroneous nonseparation denials.
Prior Agency Action
Because the state agencies are responsible for the majority of the erroneous nonmonetary denials and for a significant proportion of the monetary denials, it is instructive to examine agency action prior to the DCA investigation. Agencies had resolved or were in the process of resolving nearly 35 percent of the erroneous monetary denials. For nearly the same percentage of the improper monetary denials, the agency could not detect the cause of the erroneous denial through its normal procedures. Typically, these are claims for which the wages were incorrectly reported by the employer.
For improper nonmonetary denials, the agency identified the issue but took the incorrect action for a little over half of the improper separation determinations and over 40 percent of the erroneous nonsepartion determinations.
Although the agency followed its procedures, the issue or information was undetectable for 16 percent of the improper separation determinations and one-fourth of the erroneous nonsepartion determinations. That is, the agency issued its determination to deny eligibility based on inadequate information that was the best available under normal procedures at the time of its decision.
Separation Issues
A little over half of the separation denials concerned voluntary quits, while discharges accounted for most of the balance. "Other" includes a small number of labor disputes, military separations, or claimants who were still job attached (partial unemployment).
Error rates varied little between the two major separation issues. Eight percent of the denials concerning
discharge issues were incorrect, compared with seven percent of the denials related to voluntary quit issues. The
large error rate for "Other" separation issues has little impact on the overall separation error rate because of
the small size of this subgroup.
Nonseparation Issues
Nonseparation denials are distributed among several issues, with reporting and registration issues, disqualifying or unreported income issues, and able / available issues collectively comprising the majority.
Eligibility that was denied because the agency determined the claimant was not able to work had the lowest error
rate (9.7 percent). The highest error rate occurred in the relatively small category of denials related to work
search issues (19.8 percent).
Detailed BAM Paid and Denied Claims Data and BAM Methodology