Backlogs, Fraud, and Equity Gaps
This post kicks off our five-part series on the future of Unemployment Insurance (UI) adjudication and modernization.
Over the coming weeks, we’ll explore the systemic challenges states face, the modern unemployment insurance software for government, the technologies poised to transform casework, and the policy and funding strategies needed to sustain reform. Together, these posts outline a roadmap for building a fairer, faster, and more resilient UI system.
The unemployment benefits system is one of the most critical safety nets in our economy, but for decades, it has operated on fragile foundations. The pandemic didn’t create these cracks; it exposed and widened them. In this first installment, we’ll examine how outdated systems, surging fraud, and inequities for vulnerable populations created a crisis in UI adjudication. We’ll also set the stage for what modernization requires in the absence of rescinded federal funding.
A System Under Strain
At the heart of today’s UI adjudication crisis are systems that were never designed to handle the complexity and volume of modern claims. Whether a state still operates on a mainframe or has been successful in modernizing in the last 20 years, they all expose shortcomings in system design and efficiencies.
When the pandemic hit, states were suddenly processing hundreds of thousands of claims in weeks. UI claims management software that hadn’t been upgraded in decades struggled to keep up. The result was massive backlogs, millions of workers waiting weeks or months to access the benefits they needed to pay rent, buy food, and cover healthcare.
A modernized UI benefits administration system must go beyond patchwork fixes. States need an end-to-end unemployment insurance solution for states that can scale dynamically during surges, integrate new federal programs quickly, and provide staff with intuitive tools to manage cases efficiently. Without this, backlogs are inevitable the next time the labor market experiences stress.
Fraud at Scale
As states scrambled to keep benefits flowing, organized fraud rings pounced. Legacy unemployment insurance software for government lacked the fraud prevention tools for unemployment insurance necessary to spot sophisticated schemes. Billions of taxpayer dollars were siphoned away by identity thieves using stolen personal information.
AI-powered unemployment claims software adds another layer of protection, continuously learning to detect emerging fraud patterns without flagging legitimate claims unnecessarily.
States must balance the imperative to stop fraud with the equally urgent need to ensure timely and equitable access to benefits. This balance is only possible with an AI-neutral unemployment claims processing software approach: systems that deploy unbiased AI adjudication tools for UI benefits. Transparent and explainable UI decisioning systems, part of a federally-compliant AI UI solution with audit logs, give claimants confidence that determinations are fair, while providing regulators with the oversight they require.
Unequal Impacts
The crisis hasn’t been evenly distributed. For many claimants, especially those with low incomes, limited English proficiency, or unreliable internet access, the unemployment benefits process was anything but straightforward.
Workers in rural areas struggled to use outdated online portals on mobile devices. Non-English speakers often found that unemployment insurance software with IVR and chatbot support wasn’t available in their language, leaving them confused about what documents to submit or deadlines to meet.
A truly modernized unemployment benefits processing system must embed equity into its design. Automated fact-finding and document upload portals for UI claims reduce paperwork hurdles. Unemployment appeals and hearings management software ensure claimants can navigate disputes fairly and efficiently. And a scalable cloud-native UI platform built for federal standards makes it easier for states to expand language support and accessibility features across the board.
Why Modernization Can’t Wait
For a brief moment, states had a potential lifeline: ARPA modernization grants. These funds were intended to help replace legacy systems with a modular unemployment insurance technology platform and an AI-enabled UI claims system aligned with federal procurement. But when those grants were rescinded, the urgency didn’t disappear; it grew.
Now, states must identify their own paths forward. Some will invest in state-funded solutions. Others will form multi-state consortia, pooling resources to implement innovative UI software built on a secure government AI stack. Public-private partnerships may also emerge, pairing vendor financing with government oversight to deploy future-ready unemployment benefits tools with advanced AI, supported by an AI governance-ready unemployment insurance platform.
The point is clear: modernization is no longer optional. States cannot afford to wait for the next crisis to expose systemic weaknesses. A modern, modular, end-to-end unemployment insurance solution for states, complete with real-time eligibility determination for UI benefits, UI overpayment and recovery tracking software, and a federal UI reporting and compliance solution, must become the new baseline.
The Human Cost of Delay
When backlogs persist, it isn’t just a numbers game. Every delayed claim represents a person, often a family, staring at unpaid bills, eviction notices, or lost access to healthcare. Caseworkers, too, bear the brunt of outdated systems. Instead of focusing on adjudication case management for unemployment insurance, they spend hours manually reconciling inconsistent data or troubleshooting technical glitches.
Modernization isn’t just about speed; it’s about dignity. Claimants deserve a transparent and explainable UI decisioning system that doesn’t leave them in limbo. Staff deserve tools that allow them to adjudicate cases fairly and efficiently, supported by a modernized UI benefits administration system that reduces friction instead of creating it.
Conclusion
The pandemic revealed a simple truth: America’s UI system is not built for resilience. Outdated technology, inadequate fraud defenses, and inequitable claimant experiences have left millions vulnerable. The rescission of ARPA grants may have slowed the pace of planned modernization, but it cannot be an excuse for inaction.
The next generation of unemployment insurance software for government must be[cloud-native, modular, AI-governance ready, and claimant-centered. It must integrate identity verification systems for UI claims, fraud prevention, adjudication case management for unemployment insurance, and appeals into a single transparent and explainable UI decisioning system. And it must be flexible enough to adapt to federal guidance, labor market shocks, and the diverse needs of claimants.
Catalis partners with state agencies to modernize UI adjudication, replacing legacy systems with cloud-based, claimant-friendly solutions that serve as a state unemployment insurance platform. Our AI-powered unemployment claims software and modernization expertise deliver a secure, scalable, and AI governance-ready unemployment insurance platform for states ready to step into the future.
If your state is wrestling with backlogs and outdated infrastructure, let’s start a conversation about how Catalis can help you move from patchwork fixes to lasting modernization. Together, we can build a future-ready unemployment benefits tool with advanced AI that balances speed, equity, and fraud prevention.
Visit Catalis for a comprehensive look at our solutions for government and the public sector.