Understanding the Employer-Facing Cost Burdens of Addiction

Despite estimates of national costs exceeding $400 billion annually for U.S. employees with addictions, many business leaders are largely unaware of how addiction actually impacts their organizations and their bottom line.  While employers who self-insure and provide individual coverage pay an average of $1,729 per employee with no substance use disorder each year, the average employer cost for a worker with a substance use disorder who uses healthcare services is $2,197. Let’s walkthrough the top four contributors to employer-facing costs of addiction in the workforce.

1. Healthcare(including Mental Health) Expenses

The U.S. Surgeon General reported that collectively, roughly $85 billion is spent to treat injuries, infections and illnesses associated with risky and dependent substance use. Although employees with any substance use disorder report greater healthcare use than their peers, costs rise significantly for workers with a pain medication use disorder, who are more than twice as likely as their peers to have been hospitalized in the previous 12months, and stayed in the hospital more than twice as long. No other substance use group shows such a great difference in hospital use.  In addition to increased hospitalizations, workers with addictions to prescription opioids utilize hospital Emergency Department services more than four times as often as workers with no SUD or those in recovery.

Adding to the healthcare cost burden are mental health issues. People with addictions suffer from serious psychological distress, depression and anxiety – particularly those with a prescription opioid use disorder. These workers also stand out relative to suffering serious distress, which they report seven times more frequently than their peers without an addiction. And, while workers with addictions are usually twice as likely to suffer from depression and anxiety as their peers, those with addiction to prescription opioids are four times more likely to experience these ailments.  It is estimated that 37 percent of American adults (more than 9 million) struggle with both a substance use issue (alcohol or drugs) and a mental illness. On top of that, drug use, and the related healthcare claims, are increasing among young people age 18-26 (who may still be dependents on their parent’s health insurance). In fact, according to the National Institute on Drug Abuse, more than 40 percent of high school seniors vaped in the past year.  

2. Lost productivity and absenteeism

Overall, lost productivity as the result of substance use disorders cost employers $25.5 billion annually. The cost of addiction is amplified through worker distraction and productivity lost.  The typical worker misses about two weeks (10.5days) of work annually for illness, injury or reasons other than vacation and holidays. But workers with a SUD miss nearly 50 percent more days than their peers, averaging nearly three weeks (at 14.8 days/year). Workers with pain medication use disorders are absent nearly three times as much –nearly six weeks (or 29days).  Most of these extra days of missed work are associated with injury, adding up to more than 22 days annually.

In addition to being inconvenient, absenteeism creates serious issues for productivity. Employers may need to incur additional costs (such as hiring substitutes or adding to the workload of other workers) to ensure the work is completed as needed.

3. Low morale and turnover

If employees are using drugs in the workplace, the chances are high that employee morale and the company culture will suffer. Usually, employees who are absent as the result of an addiction are less productive and behave erratically at work. In turn, this tends to make others in the workplace resentful. 

Turn over is another significant issue impacting employer costs. While 25 percent (one quarter) of employees are much more likely than their peers to report having more than one employer in the previous year, this number rises to 36 percent among workers with SUDs. And, workers with prescription pain medication use disorder were even more likely to have more than one employer in the previous year (42percent).

Productivity losses are common when people frequently change jobs and onboarding new employees must occur. Replacing workers is expensive. To recruit and retain employees for a vacant position, the cost burden to the employer is around 21 percent of a job’s annual salary.

4. Disability and Workers’ Compensation

Drug and alcohol abuse in the workplace are the cause of 65 percent of on-the-job accidents, according to the U.S. Department of Labor. In addition, 50 percent of all workers’ compensation claims are related to the abuse of alcohol or drugs in the workplace