California EDD Freezes 345,000 Disability Insurance Claims

The California department that distributes workers’ disability benefits froze 345,000 claims to crack down on suspected organized fraud rings and bogus claims.

There have been an unusual number of new disability claims submitted to the Employment Development Department over the past month, EDD said.

This prompted the department to freeze 27,000 suspicious medical provider registrations and claims associated with those providers while it investigates which ones are legitimate. They are now required to verify their identity.

The action, taken in recent weeks, has left some in limbo.

“It’s amateurish, irresponsible and downright wrong,” said Nick Lagusis who had his claim frozen just before the holidays. “Without warning, nothing to expect, boom, they withheld the money.”

He filed for disability last fall for persistent pain and problems following a car accident where he was hit head-on by a district driver. Lagusis is one of 345,000 claims reported by EDD as part of a widespread impersonation scam.

“As EDD put new filters in place to prevent unemployment insurance fraud, some of the same groups switched to disability insurance,” said former EDD director Michael Bernick. “It’s another great government program.”

The state disability insurance program is generally not a target of fraud. Workers pay into it and nearly 900,000 claims are filed each year.

But for a month and a half, several workers who filed disability insurance claims told KTVU they had been unable to pay their bills, rent and make ends meet.

“I’m angry,” said Theresa Holt, who faced medical issues that required hospital treatment and didn’t receive a dime. “I’m stuck in this loophole they’ve created. I think that’s unacceptable.”

The EDD said it is working to verify legitimate claims and weed out those made by fraudsters.

The situation is reminiscent of the problems EDD has had with unemployment claims. In October, state officials said EDD had cheated out of $20 billion from applicants filing bogus unemployment claims.

SEE ALSO: Frustrated with EDD? Here’s where you can ask for help

The EDD had tried to freeze unemployment benefits as it sought to sort deserving cases from fraudulent claims. But EDD agreed to drop that tactic when it settled a class action lawsuit and instead agreed to send checks while it investigated potential fraud.

“The challenge is finding a balance between getting people paid quickly and preventing fraud,” Bernick said. “I think what we will see is that EDD will move quickly to unblock these accounts. They are fully aware of the criticism.”

In a statement, EDD said settling legitimate claims was its top priority.

But for those who are desperately waiting for their benefits to be paid, they are the losers.

“I went down to minus $34 in my account,” Lagusis said. “We want to work. We can’t work. And they’re about to make us homeless.”

Brooks Jarosz is an investigative reporter for KTVU. Email him at [email protected] and follow him on Facebook and Twitter: @BrooksKTVU

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