A not-so-hidden workplace cost: employers bear the costs of depression, stress, and other mental illnesses in the form of lost productivity, absenteeism, and higher disability costs. Here’s why you shouldn’t ignore these conditions

Lori Widmer

Concerned about rising health insurance costs? About disability and workplace injuries? What about depression among your employee population? You should be.

Many companies may not be aware of the extent of depression in the U.S. population or its impact on employers. In fact, depression can be one of the most devastating illnesses to a company’s bottom line. What’s more, depression isn’t the only mental illness permeating the office. Anxiety, stress, posttraumatic stress disorder, and panic disorders affect more than 40 million American adults annually, according to the National Institute of Mental Health. Almost 15 percent of the U.S. population suffers from a major mental illness or from substance abuse. And about 1 in 4 Americans will suffer a serious mental disorder in their lifetime.

While federal and state laws prohibit employment discrimination against individuals with physical and mental disabilities, the health insurance industry has largely been silent on the issue. Many health insurance companies often limit treatment or reimburse treatment for mental illnesses at lower rates than they do for physical illnesses. Efforts have been under way for some time now for Congressional action to compel insurance companies to offer coverage for mental health that equals that of physical health. These efforts so far have not been successful. Business groups are concerned that efforts to increase coverage for mental health will increase employers’ health insurance costs.

But as the insurance industry and business groups fight against “mental health parity,” the costs of such illnesses are borne by employers in other ways. A U.S. Surgeon General’s report in 1999 found that lost productivity and absenteeism due to untreated mental health disorders cost American businesses $70 billion annually.

And according to statistics from The Center for Reintegration Inc., North Bergen, N.J., five out of the 10 causes of disability are related to mental illnesses.

But mental health parity may not result in the cost increases business groups worry about. A Congressional Budget Office report has found that parity will likely result in health insurance premium increases of less than one percent.

Depressing Numbers

Says Dr. Ron Leopold, national director, MetLife Disability, 10 percent of long-term disability and six percent of short-term disability claims are due to psychiatric disorders.

“For an employer of 1,000 employees, it will be about 100 short-term disability claims, seven of which will be for psychiatric causes,” he says. “Relative to the other types of short-term disability claims, the psychiatric claims tend to result in much longer duration or days missed from work. They’re the most difficult to manage.”

“In short-term disability, 50 percent of our claims for mental disability are for depression,” Leopold says. But that’s merely the beginning, he says. There are many more who are depressed and on the job. “Stress in the workplace may be the primary reason someone is disabled. Very often we have folks who are on a short-term disability claim where the real driver might be that the anxiety is stemming from a work situation.”

“If a person is moderately or profoundly depressed, if he or she has a true anxiety disorder or a true stress disorder, the level of productivity in the workplace is going to be greatly diminished. These disorders take their toll in the workplace.”

What’s more depressing is the fact that coverage isn’t always available or adequate. According to the Bureau of Labor Statistics, 79 percent of employees in large and medium sized firms offering mental health benefits had more restrictive hospital coverage for mental illness than for other illnesses. Ninety-five percent of health insurance plans surveyed limited outpatient coverage.

“There’s still a stigma associated with mental illness,” says Robert Hartwig, chief economist with the Insurance Information Institute, New York. “Probably the most common form of mental illness is depression, which is believed to be a simple chemical imbalance in the brain. Depression may not cause erratic behavior, but it certainly reduces productivity, increases tardiness or absence from work. Also, if someone is depressed at work, do they start to make mistakes? Will they injure themselves or someone else?”

The fact that it’s a treatable disorder is all the more indication that employers should work to help employees address mental maladies. Leopold says that partnering with a short-term disability carrier is a start. “Partner with a carrier that has a proactive dedicated program to address these unique claims. Another way is to offer rich medical service benefits. If group health plans are stingy with psychotherapy and reimbursement for psychotropic medicines, that may work against an employer in the long run in terms of being pennywise but dollar foolish, having a negative impact on productivity.”

How management views a person’s mental illness has a profound affect on the would-be patient. “One mistake an employer makes is to have managers and line supervisors who harbor a stigma against these mental health claims,” says Leopold. “An area for improvement would be educating supervisors and managers about these conditions because they’re extremely prevalent in a working population. We’re dealing with folks who have a number of issues, and once these folks get well enough to return to work, that return to work should be embraced.”

The cost of ignoring the mental health of the work force can have devastating effects on the bottom line. “We do know what the numbers are with regard to how many have to leave the workplace due to disability, so we can get a dollar value there,” says Leopold. “The other piece, though, is the working wounded, if you will. They’re at work, but depressed. The lost productivity there is also sizable. The cost of treatment is probably a bargain relative to the cost of not treating.”

In some rare cases, a mental disorder could be determined to be a physical disability. In 1995, an employee at the Federal National Mortgage Association (Fannie Mae) was diagnosed with bipolar disorder, a form of manic depression, and was unable to continue working. After her diagnosis, the employee applied for disability benefits. Her disorder was found to be disabling, but was diagnosed as a mental illness, which wasn’t covered for longer than 24 months under her employer’s policy.

According to the U.S. District Court of Appeals for the District of Columbia Circuit, the court upheld the employee’s claim that her disorder was physical in nature. While the courts did decide to uphold a lower court’s dismissal of the plaintiff’s claim, the court also ruled that the wording within Fannie Mae’s benefits plan was too ambiguous to support the company’s claim that bipolar disorder was classified as a mental illness.


Stalled in the House at this writing is the Mental Health Parity Bill, designed to require employers and insurers to treat mental illnesses as they would physical illnesses. The Senate last year passed a mental health parity amendment, the Mental Health Equitable Treatment Act, but it was quickly deleted in conference when concerns were raised about it raising health insurance costs. What has occurred is the 1996 Parity Act was renewed for one year. The act offers parity only for lifetime and annual limits.

“It would obligate employers to offer benefits for mental illness,” says Hartwig. “That bill is an outgrowth of the fact that mental illness is a disease and is something that can respond to treatment. There has to be some binding rules and regulations, however. One has to define what mental illness is and what the appropriate treatment for it is.”

Lori Widmer can be reached at lwidmer@lrp.com.

COPYRIGHT 2002 Axon Group

COPYRIGHT 2008 Gale, Cengage Learning

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