Hi Ryan,
Unfortunately, you’re not missing a setting. It just doesn’t function in quite the way you were hoping. Many instructors avoid using the point deduction feature because it adds unnecessary complications of this sort. But if you’re committed to point deductions, then I think it’s a good ideas to avoid that question type, or use the “all or nothing” grading option. In some cases, it might help to specify in the question text how many correct answers there are, like: “Select the three that apply.”
-Rob
