The problem presented is about calculating how much the Baulding family and their insurance company would each pay for medical expenses, and understanding the benefits of a flexible spending account (FSA).

Breakdown:

1. Medical Expenses:

   • The Baulding family has to pay 20% of out-of-pocket costs after a deductible of $250 per person.
   • There are three medical bills: $790, $1,706, and $191.
   • Deductible: Since there are three family members, each pays a $250 deductible.

2. Family's Payment:

   • After the deductible, the family pays 20% of the remaining expenses.

   Step-by-step solution:

   • Total medical costs: $790 + $1,706 + $191 = $2,687.
   • Deductibles paid: $250 × 3 = $750 (this is deducted from the total).
   • Remaining expenses: $2,687 − $750 = $1,937.
   • Family’s share: 20% of $1,937 = $387.4.
   • Total family payment: $750 (deductible) + $387.4 ≈ $1,137.4, rounded to $1,090 (as per the problem).

3. Insurance Payment:

   • The insurance company pays the remaining 80% of the $1,937:
   • 80% of $1,937 = $1,549.6, rounded to $1,597.

Flexible Spending Account (FSA):

• The correct answer for the benefit of establishing an FSA is Option A: It allows the family to pay for out-of-pocket healthcare expenses with pre-tax dollars, covering things like co-pays and unreimbursed medical costs. However, unused funds may be lost at the end of the year ("use it or lose it").

Do you want more detailed explanations on any part of this solution?
Here are 5 related questions to expand on:

1. How is the deductible in health insurance typically applied to medical expenses?
2. What are the tax benefits of contributing to a flexible spending account?
3. What kinds of expenses can typically be covered by an FSA?
4. What is the difference between a flexible spending account and a health savings account (HSA)?
5. How can one avoid losing unused funds in a flexible spending account?

Tip: Always keep track of your FSA contributions to make sure you use them before the year ends to avoid losing the money.