Hamilton County School reaction to federal insurance fraud trial

CHATTANOOGA (WDEF) – The Hamilton County School System responds to a trial going on now in federal court involving three of their employees.

The Federal prosecutor says BlueCross/BlueShield of Tennessee was a victim of a national insurance fraud scheme involving a “miracle” skin creme.

The local case was run through the schools healthcare plan.

The system has launched their own investigation now that the criminal charges have been brought.

Here is the statement, in full, from school system attorney Scott Bennett on the case:


Between 2015 and early 2016, the U.S. Attorney’s office determined that a national insurance fraud scheme involving prescription drugs included Blue Cross/Blue Shield of Tennessee (BCBS), the insurance administrator for the Hamilton County Department of Education. 

In early 2016, BCBS noticed there had been exorbitant charges to the district’s employee health plan for bulk chemical creams, prompting the district to consider revising coverage to exclude these types of prescriptions in the future. However, in April 2016, an employee notified the district’s benefits office of a suspicious email solicitation regarding prescriptions for pain creams. The district reached out to me seeking advice on what to do with this information. I advised the administration to contact the county District Attorney. On the advice on the DA’s office, the Hamilton County Department of Education benefits personnel discontinued filling prescriptions related to the creams shortly thereafter. 

According to the indictment obtained by the U.S. Attorney for the Eastern District of Tennessee,  BCBS had been a victim of a national insurance scam that resulted in millions of dollars in fraudulent charges, largely targeting TRICARE, the U.S. military public insurance provider. As part of that scheme, between January 2015 and early 2016, the fraudulent charges to BCBS related to the Hamilton County Schools plan were estimated to be $954,000. The fraudulent charges were facilitated through out of state doctors writing prescriptions for employees that were filled by pharmacies and then billed to the district insurance plan. BCBS was later able to recoup approximately $325,000 in charges from the pharmacy that filled the prescriptions.

Hamilton County Schools benefits office cooperated with Neil Pinkston, the Hamilton County District Attorney, the Hamilton County Sheriff’s Office, and the U.S. Attorney’s Office in the lengthy investigation, but these law enforcement officials did not share with anyone the scope of their investigation or the impact on the school system. School officials learned just prior to the trial that three current employees would be implicated in the scheme, but the district could take no action until after the government put on its case. The U.S. Attorney is in charge of the case. 

Since the case is now in the public domain, Hamilton County Schools has launched an internal investigation into the actions of the employees implicated; they deny any criminal wrongdoing. However, the individuals have been suspended without pay pending the results of the internal investigation.

The district administration proceeded in a manner consistent with my legal advice and in cooperation with local and federal law enforcement towards resolving this insurance fraud case. The U.S. Attorney required extreme confidentiality while the case was pending. Circumstances certainly did not allow for any communication regarding the insurance fraud that took place during the 2015-2016 timeframe. 

Specific questions regarding the ongoing trial should be directed to the U.S. Attorney’s Office for the Eastern District of Tennessee.

Categories: Featured, Hamilton County, Local News

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