Health care costs are expected to outpace general inflation by 4x over the next four years—making managing these costs the number one priority for 38% of employers in 2024.

Meanwhile, mental health concerns are on the rise in the workplace, with 75% of employees facing one or more such challenges in the past year. This, too, is a top concern for companies since struggles with stress, burnout, and anxiety can cause productivity to plummet and increase medical expenses even further.

These issues beg the question: how can companies address soaring health insurance costs while supporting employees?

Some C-suite leaders have found practical solutions to this dilemma by investing in their employees’ mental well-being, as you’ll read below. But first, let’s explore the hidden costs of ignoring mental health in the workplace.

Mental Health in the Workplace: The Rising Cost of Inaction

The direct and indirect costs of untreated mental health conditions are too significant for companies to ignore.

Depression and anxiety alone cost the global economy one trillion USD each year in lost productivity. That translates to an estimated loss of 12 billion working days annually, according to the World Health Organization (WHO).

There are three main ways mental health challenges increase costs for companies:

1. Lost productivity
2. Increasing medical claim spend
3. Worsening existing physical conditions

We’ll explore these more in depth below.

1. Mental Health Challenges Drain Productivity

Costs related to mental health concerns extend beyond just medical care. Research shows that work-related stress can lead to poor output, a higher likelihood of human error, and absenteeism. In fact, mental health concerns are one of the top reasons employees call out of work, as is the case with an estimated 30-40% of sick absences in the U.K.

But absenteeism is only part of the story. Presenteeism—when employees are physically present but not engaged—can significantly drain productivity as well.

Stress and anxiety have also been found to lead to:

• Greater difficulty in concentrating or making business decisions
• Decreased performance
• More accidents
• Higher staff turnover

The opposite is true, too, according to Dick Costolo, co-founder of A1 Advisors and former CEO of Twitter. In his experience, employees who prioritize their mental health are often more energized and motivated, while those who don’t have a chance to rest or recharge are often drained before the end of their workday.

“People who take care of their mental, emotional, and physical well-being are 20-25% more productive in hours five through eight,” he says.

In this quick clip, Costolo discusses the intersection of physical health, mental health, and productivity:

2. Mental Health Impacts Broader Health Care Costs

Given the high rates of co-occurrence between mental and physical health concerns, conditions like stress, anxiety, and depression can also drive up overall health care costs for organizations.

Untreated mental health concerns are associated with a 3.5x increase in medical claim spend—not just behavior health claims, but across all domains.

For some companies, like Roux Inc., as many as one-third of employee medical claims are related to mental health issues.

“This really piqued my interest as CFO,” says Mary Macy, Chief Financial Officer at Roux. “[It showed] we needed to do something about this—not only from a financial health perspective for our company but also for our employees.”

3. Mental Health Issues Exacerbate Physical Conditions

One specific way mental health concerns can drive up health care costs is by aggravating existing physical illnesses. Stress, anxiety, and depression can worsen conditions such as:

• Heart disease
• High blood pressure
• Diabetes
• Chronic pain
• Gastrointestinal issues
• Back pain
• Headaches
• Various minor illnesses

The reverse is also often true: improving mental health concerns can help employees care for their physical health and ultimately improve outcomes. Addressing mental health isn’t just about reducing therapy costs. It’s also about mitigating the larger medical claims that stem from untreated issues.

Addressing Mental Health in the Workplace: Leadership Lessons from Roux Inc.

Making mental health a priority often starts with in-depth data analysis and honest reflection. Roux Inc., an environmental remediation firm with over 450 employees, sets an excellent example of this approach. In 2021, to address skyrocketing health care costs, Roux adopted a self-insurance model for employee health care.

Macy says the company’s new model provided deeper insight into medical claims activity. It revealed that a shocking one-third of all claims were related to mental health in two out of four years. For the company’s financial health and employees’ well-being, Macy knew Roux needed to make some changes.

“Our employees are our most important asset,” she says. “It’s our culture. It’s who we are. It’s what we sell to our clients. So it’s critical we understand what makes them tick. If we don’t, we lose productivity. We lose those billable hours, which drives the bottom line.”

In this quick clip, Macy discusses managing health claims costs:

Discovering Solutions Through Employee Feedback

In analyzing employee exit interviews, Roux leadership found two common pain points: 1) stress stemming from client deadlines and goals for billable hours and 2) the inability to access mental health care quickly using the provided medical health coverage.

Roux addressed these issues by:

• Revisiting how they communicated revenue expectations
• Offering employees more support to reach their goals
• Ensuring employees have streamlined access to mental health support

Macy points out that finding a balance between employee needs and company performance isn’t easy, but it’s essential for organizations seeking to build a healthy workplace culture that will endure.

“We all need to keep our fingers on the pulse of our employees,” she says. “What resources do they need to help them work through the struggles of their personal and professional lives to be the best they can be?”

Actionable Strategies for Prioritizing Mental Health in Your Organization

Creating a workplace culture of mental health takes dedicated effort, honest reflection, and patience. If you want to start cultivating a healthier, more productive workforce in your organization, consider the steps below.

1. Start small

Your company doesn’t have to implement large-scale programs right away. If your organization is just beginning to prioritize mental health, try testing smaller initiatives, such as:

• Providing a meditation program or app
• Hosting a short workshop on stress management, mindfulness, or self-care
• Creating community groups for peer support
• Asking employees about potential causes of work-related stress
• Providing an employee discount to local gyms
• Offering free access to fitness apps
• Collecting employee feedback and providing an anonymous option

2. Set the tone by protecting your own mental health

To set an example for employees, leaders must prioritize their own mental and physical health. Whether you realize it or not, your day-to-day mental well-being can directly impact your employees.

For example, Costolo has found that if he ignores mounting stress in his life, collective anxiety rises and productivity dips. He says the vice president of Human Resources had to confront him one day because employees were worrying about his stressed demeanor instead of working.

“I can tell you from personal experience that it’s a huge productivity drain when [a leader] isn’t rested and ready to go,” he says.

In this quick clip Costolo explores the importance of prioritizing the mental health of people managers: 

3. Encourage open conversations to foster a stigma-free culture

Despite society’s recent strides in normalizing mental health conversations, stigma is still a major obstacle to implementing a culture of wellness. Some employees may hesitate to admit mental health struggles for fear of repercussions from management or peers. Leaders can combat this negative perception by sharing openly about their own mental health journeys.

“A big thing I’ve found to be impactful … is talking about my mental health challenges and encouraging other leaders to do so as well,” says Bryan Power, Head of People at Nextdoor.

Whenever Power shares openly about his past struggles with anxiety or depression, people thank him afterward—revealing the value in leaders initiating honest mental health conversations.

4. Promote accessible mental health resources

Research shows that evidence-based workforce mental health programs can reduce health care costs for employees and employers while making care more accessible for workers. Companies can offer access to resources like Employee Assistance Programs (EAPs), mental health apps, telehealth platforms, and on-site or virtual counseling.

Companies can also use a platform like Modern Health to provide their employees with personalized mental health care, ranging from prevention to crisis intervention. Modern Health’s global platform makes it easy for employees to get top-quality care and access group or one-on-one sessions within hours instead of weeks, helping organizations lower their health care costs along the way.

The key to getting the most out of a companywide mental health program is by consistently promoting it. Here are a few ways to do so:

• Leadership advocacy: Get leaders to join the program and talk about it with employees.
• Multi-channel distribution: Share the benefits of your program via email, intranet banners, and on-site posters.
• Onboarding information: Create a guide explaining how the program works and the steps to start.
• Awareness events: Host a lunch-and-learn session or a short workshop to raise awareness for the program.

Prioritizing Mental Health: Why Businesses Must Act Now

With rising health care costs and mounting psychological stressors among employees, one thing is certain: addressing mental health in the workplace is no longer optional, and the time to act is now. 

Companies that prioritize mental health create a foundation for long-term success while attracting and retaining top talent. In contrast, ignoring these needs risks not only employee well-being but also productivity, retention, and the organization’s overall health.

To hear the rest of this conversation and gain actionable strategies, watch the on-demand session from Elevate 2024.