To solve the expenses problem, let’s break down the Baulding family's out-of-pocket costs and the insurance company's contribution after the deductibles. Each family member has a $250 deductible, and the insurance covers 80% of out-of-hospital expenses after deductibles.

1. Calculate the expenses and payments for each family member

1. Family member with $833 in expenses:

   • Deductible: $250
   • Remaining amount after deductible: $833 - $250 = $583
   • Insurance payment (80% of $583): $583 * 0.80 = $466.40
   • Family payment: $250 (deductible) + $116.60 (20% of the remaining) = $366.60

2. Family member with $1,895 in expenses:

   • Deductible: $250
   • Remaining amount after deductible: $1,895 - $250 = $1,645
   • Insurance payment (80% of $1,645): $1,645 * 0.80 = $1,316
   • Family payment: $250 (deductible) + $329 (20% of remaining) = $579

3. Family member with $188 in expenses:

   • Total expenses ($188) are less than the deductible ($250), so the family pays all of it.
   • Family payment: $188

2. Total Family Payment and Insurance Payment

• Family total payment: $366.60 + $579 + $188 = $1,133.60, rounded to $1,134
• Insurance total payment: $466.40 + $1,316 = $1,782.40, rounded to $1,782

So, the Baulding family will pay $1,134, and the insurance company will pay $1,782.

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Part 3: Flexible Spending Account Benefits

A flexible spending account (FSA) can offer benefits by allowing the Bauldings to pay for healthcare expenses that aren’t covered by insurance, such as deductibles and co-pays, using pre-tax dollars. This can reduce taxable income and increase savings.

Best Choice:

• Choice A is best, as it describes the primary advantage of using pre-tax dollars and mentions the "use it or lose it" policy, a potential downside if contributions aren't fully spent.

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Would you like more details on each step, or do you have specific questions?

Relative Questions to Explore Further:

1. How would the calculations change if one family member had additional expenses?
2. What are the implications if a family member’s expenses exceed a certain threshold?
3. How does the deductible impact the family’s yearly health costs?
4. What happens if the family has a Health Savings Account (HSA) instead of an FSA?
5. How do similar insurance plans handle out-of-pocket maximums?

Tip:

FSAs are typically limited to a yearly contribution cap, so it’s essential to estimate anticipated expenses to avoid losing unused funds.