JLARC report: VEC could have been better prepared to handle influx of unemployment claims

Published: Sep. 20, 2021 at 8:12 AM EDT|Updated: Sep. 20, 2021 at 8:04 PM EDT
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RICHMOND, Va. (WWBT) - The General Assembly’s watchdog agency found the Virginia Employment Commission could have been better prepared to handle the influx of unemployment claims from the COVID-19 pandemic.

On Monday, the Joint Legislative Audit and Review Commission (JLARC) released an interim report of the review of the VEC.

“The common theme you’ll see is while the agency couldn’t have been fully prepared to respond, it could have been better prepared,” one staffer said. “Action could have been taken sooner.”

The study required JLARC to review the certain areas of operation within the VEC, including:

  • COVID-19′s impact on VEC and effectiveness of response
  • Administration of Unemployment Insurance (UI) program, including overpayments, appeals, and customer service
  • IT systems and UI modernization project
  • Ability to connect Virginians with meaningful employment opportunities
  • Sufficiency of agency staffing, funding, and management; and
  • UI benefits compared to other states

The final report is expected to be presented on Nov. 8, with more recommendations on how the VEC should try and fix any ongoing issues.

However, Monday’s findings are eye-opening and had lawmakers demanding immediate changes and accountability.

“We see these findings and we agree it’s been an extreme challenge,” said Virginia Secretary of Labor Megan Healy. “Our ultimate goal is to make sure individuals who are eligible for benefits will get benefits in a timely manner.”

The timeliness has been a struggle for thousands of Virginians. Per the U.S. Department of Labor, someone filing for state unemployment insurance benefits should expect to receive their first payment within 21 days.

That timeframe has been a challenge for the VEC, even recently.

“As of July 2021, VEC was only processing 26% of first payments within 21 days,” said Lauren Axselle, project leader for JLARC. “Nearly half of claimants were waiting more than 70 days before payments.”

That trend continues when it comes to the adjudication process or the formal investigation of an outstanding issue on a claim. The U.S. Department of Labor requires 80% of adjudications to happen in 21 days.

“VEC has historically struggled to meet this federal standard and performance further decreased in 2020 during COVID,” Axselle said. “As of June 2021, VEC was completing only 2% of adjudications within 21 days. 82% of the claimants were waiting more than 70 days on adjudication.”

Meanwhile, to expedite payments to claimants, the U.S. DOL allows the VEC to approve claims before reviewing specific documents to determine eligibility (employer separation reports).

The report found that while this reduced claimants’ wait times it also resulted in overpayments.

“VEC has not reviewed separation reports submitted for roughly 579,000 claims,” JLARC’s report showed. “The oldest report awaiting VEC review is from August 2020.”

However, first payments were already issued in many cases, but any issues found in separation reports resulted in payments being paused.

“Some claimants will be ineligible, will owe the VEC [the money],” the presentation said.

Roughly $930 million in incorrect payments is estimated to have been paid out in 2020. This can happen as a result of VEC staff, customer mistakes or fraudulent claims.

“Nearly 100% of incorrect payments were overpayments,” the report stated. “Fraudulent claims are a portion of incorrect payments… VEC estimated to have paid $70 million in fraudulent state UI claims in 2020.”

Currently, the VEC is assessing how to recover the UI payments that were sent but has paused all collections at this time until a plan is in place.

Meanwhile, the interim report also showed a vast majority of these issues are due to staffing shortages at the agency.

Even before the pandemic, the VEC was dealing with limited staffing. There was 55 adjudication staff on hand with 85 employees answering call center calls.

Meanwhile, the VEC says the number of IT programmers were also insufficient

Since Jan. 2020 and Aug. 2021, the VEC hired a net of 473 full-time staff.

Recently, outside contractors have been hired to help with the adjudication process. JLARC said the VEC is doing up to 40,000 adjudications per week as a result of the extra help.

Meanwhile, staffing at the call centers has also increased. An outside group was also hired to assist in that avenue.

The review also found VEC did not clearly communicate information to Virginians about applying and filing claims.

“VEC’s various UI forms, notices, and documents are overly complex and confusing,” Axselle said. “For example, the letter that the VEC sends to claimants describing their UI rights and responsibilities is eight pages long and uses terminology above a college reading level.”

The group recommended revises documents should be a high priority in making sure claimants understand the process.

Additionally, a more user-friendly system should be created with video instructions and phrases Virginians will understand, JLARC said.

That is the hope of the new unemployment benefit system expected to launch on Oct. 1. The current system from 1985 created several issues as well during the pandemic.

“It’s going to be better to communicate with our claimants and it’s going to show documents sent in the mail; if you didn’t get it in the mail, you can actually go into your portal and see those documents,” Healy said.

The modernization project began 12 years ago and remains incomplete eight years after its expected completion date (May 2013).

JLARC staff said while these systems are complex, modernization efforts should be implemented on average in three to five years; other states like Utah, Minnesota, Pennsylvania, Washington and Alaska have proven success.

The VEC plans to complete the new unemployment insurance benefits system in June 2022 but will have a partial launch on Oct. 1.

However, the new system does come with some risks including:

  • Incomplete and/or inaccurate conversion of UI data
  • Long black-out period for launch of new system
    • Down time planned = 5 to 7 days
    • Public will be unable to file new or continuing claims; VEC staff will be unable to process claims
  • No redundancy in case of system failure
  • Attrition of VEC or contractor staff
  • Incomplete VEC staff training on new system
    • Training started 9/13/21

“Modernizing the current UI system is a critical part of VEC’s commitment to improving the overall experience of its customers and serves as the foundation of the organization’s mission,” VEC said.

The current UI will be down for all users starting on Sept. 29 at noon. The VEC will notify users when it goes live again beginning in October.

“During this changeover period, users will be temporarily unable to complete online actions for unemployment insurance. The Customer Contact Center will also be temporarily unavailable during this period” the VEC said.

There will be no changes to how citizens receive benefits during this time.

This briefing comes nearly four months after a federal court judge ordered the VEC to fix a backlog of 92,000 cases.

An increase in claims during the pandemic led to large backlogs in processing and overwhelmed the agency’s call centers.

After a judge ordered the commission to address widespread issues, officials opened a call center and updated IT systems, eventually going through all the claims.

While the majority of the claims were resolved by the Labor Day deadline, some say it all caused a new delay with cases that were filed while the VEC caught up.

The final report by the JLARC is expected to be presented on November 8. At that time, the VEC will provide an update on the implementation of JLARC’s recommendations from Monday.

To view the interim review presentation, click here.

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