Dale Eisen is saving as much as possible to fund a down payment on his first home. He is young (25 years old) and healthy, and has declined health insurance coverage offered by his employer because he would have to pay one-third of the cost (another $100 would be withheld from his monthly paycheck). He earns $65,000 per year. He received a notice from his employer indicating that unless he declined coverage, he would automatically be enrolled in the employer’s basic health insurance plan ($5,000 deductible, employee pays one-third of the premium or $100 per month). Dale made an appointment with the human resources (HR) manager, intending to decline coverage. Assume you are the HR manager, and explain the costs to Dale of accepting coverage and declining coverage.
Remember that the $200 of cost paid by the employer is not treated as taxable income to Dale. For simplicity, assume any health insurance premiums paid by Dale do not exceed the 10% floor to become itemized deductions.