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The Proform Health Plan uses agents to market its small group business. Proform capitalizes the commission expense relating to this line of business by spreading the commissions over the premium-paying period of the healthcare coverage. This approach to expense recognition is known as:

A.

Systematic and rational allocation

B.

Matching principle

C.

Immediate recognition

D.

Associating cause and effect

The following statements are about the option for health plan funding known as a self-funded plan. Select the answer choice containing the correct response:

A.

In a self-funded plan, an employer is relieved of all risk associated with paying for the healthcare costs of its employees.

B.

Self-funded plans are subject to the same state laws and regulations that apply to health insurance policies.

C.

Employers electing to self-fund a health plan are required to pay claims from a separate trust established for that purpose.

D.

An employer electing to self-fund a health plan has the option of purchasing stop-loss insurance to transfer part of the financial risk to an insurer.

If the operational budget prepared by the Satilla health plan is typical of most operational budgets, then

A.

Its purpose is to track Satilla's operations and short-term profitability

B.

The key information source for this operational budget is Satilla's external environment

C.

The time frame for this operational budget is three to five years

D.

Its focus is on the threats that Satilla faces from its external environment

All publicly traded health plans in the United States are required to prepare financial statements for use by their external users in accordance with generally accepted accounting principles (GAAP). In addition, health insurers and health plans that fall under the jurisdiction of state insurance departments are required by law to prepare certain financial statements in accordance with statutory accounting practices (SAP). In a comparison of GAAP to SAP, it is correct to say that:

A.

GAAP is established and promoted by the National Association of Insurance Commissioners (NAIC), whereas SAP is established and promoted by the Financial Accounting Standards Board (FASB)

B.

The going-concern concept is an underlying premise of GAAP, whereas SAP tends to focus on the liquidation value of the MCO or the insurer

C.

GAAP provides for a single method of valuing all of a health plan’s assets, whereas SAP offers the health plan more than one method for valuing its assets

D.

The principle of conservatism is fundamental to GAAP, whereas SAP generally is not conservative in nature