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California freezes 345,000 ‘suspicious’ disability insurance claims

The Capitol building in Sacramento
The California Employment Development Department froze 27,000 medical provider accounts and 345,000 disability insurance claims that the agency suspected of fraud. Above, the Capitol building in Sacramento.
(Myung J. Chun / Los Angeles Times)

In the latest battle between California and scammers out to defraud its benefits system, the state said it froze 345,000 disability insurance claims that it suspects were fraudulently filed using stolen credentials of doctors and other medical providers.

The new scam could further strain California’s troubled Employment Development Department, which struggled to deliver timely benefits to jobless workers during the pandemic and paid out some $20 billion to criminals under false unemployment claims.

“My initial reaction was, ‘Good grief, one more thing the department has to deal with,’ ” said Assemblyman Richard Bloom (D-Santa Monica).

EDD said it suspended 27,000 “suspicious” medical provider accounts and 345,000 associated disability insurance claims in recent weeks. Some legitimate claims may be among the suspected fraud attempts, which could delay disability checks to Californians in need.

The department said it’s working with regulators and providers to verify and unfreeze those accounts as quickly as possible. Medical providers must verify their identity in response to an official email sent from the department.

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The legislation was signed into law shortly after after Newsom survived a recall election in which those seeking to remove him from office cited problems that included long waits for unemployment benefits for hundreds of thousands of jobless Californians.

Bloom compared the situation to this time last year, when the department announced it suspended 1.4 million potentially fraudulent unemployment benefit claims until recipients could verify their identity and eligibility. Offices of California lawmakers were inundated with calls from constituents whose benefits were paused.

“Hopefully the response system has improved sufficiently and the order of magnitude here is not so great that it’s going to cause things to implode,” he said.

So far, Bloom said his district offices have received only a couple calls from people whose disability insurance claims were halted, but that number could grow as more people realize their payments have stopped.

Sen. Richard Pan, who represents Sacramento and also works as a pediatrician, said it’s easy to find enough information online to impersonate an individual doctor, including their address, phone number, medical school, license number and national provider identifier.

“I think it speaks to the issue of privacy on the internet and the opportunity it gives people who want to scam and try to take over other people’s identity,” he said.

It’s unclear whether any payments were made to the accounts in question before the state recognized the fraud. In a release last week, EDD did not say if the 345,000 frozen disability insurance claims included all claims filed under the 27,000 suspected fraudulent accounts.

The department was closed Monday for the Martin Luther King. Jr holiday and did not immediately respond to requests for comment.

Former state employee with record of fraud to plead guilty to EDD scam

“I applaud them for shutting it down, but it’s hard for me to believe that no one got away with this scam,” said Sen. Bill Dodd (D-Napa).

California’s loss of $20 billion to fake unemployment claims and its backlog of legitimate claims drew national attention during the pandemic and resulted in a wave of new funding to hire additional staff and modernize its systems to detect fraud.

Several lawmakers said they expect EDD to provide updates on the disability insurance claims this week.


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