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The Economic Burden of Insomnia: Evaluating Treatment Costs & Health Impacts

Written by Risk Strategies Consulting | Jun 6, 2025 4:15:27 PM

Chronic insomnia, a prevalent sleep disorder affecting an estimated 10-15%1 of the general population, represents a critical yet often overlooked component of chronic disease management. Left untreated or improperly managed, chronic insomnia significantly disrupts quality of life, drives healthcare costs, and exacerbates comorbid chronic conditions such as cardiovascular disease, diabetes, and mental health disorders.

The Mismanagement of Chronic Insomnia

The current care model for chronic insomnia is fraught with challenges. Our data reveals that while Cognitive Behavioral Therapy for Insomnia (CBT-I) is the gold-standard, first-line treatment recommended by the American Academy of Sleep Medicine (AASM)2, it is significantly underutilized. Instead, 91.5% of patients receiving treatment are prescribed medication, with nearly three-quarters of these patients relying on controlled substances such as benzodiazepines (e.g., Xanax, Valium) or nonbenzodiazepine hypnotics, otherwise known as Z-drugs (e.g., Ambien, Lunesta).

This reliance on pharmacological treatments leads to both short- and long-term risks, including:

  • Physical dependence and addiction: Prolonged use of controlled substances can result in tolerance, requiring higher doses over time. Abrupt cessation often leads to withdrawal symptoms.
  • Cognitive and behavioral side effects: Excessive durations of use frequently result in memory issues, daytime drowsiness, impaired focus, and other life-disrupting consequences.
  • Higher healthcare costs: Ineffectively managed insomnia exacerbates existing chronic conditions, resulting in increased medical interventions, higher absenteeism, and lowered workplace productivity.

Effects of the Current Paradigm on Organizations

The ripple effects of unmanaged insomnia extend beyond the individual, particularly for employers, healthcare payers, and plan sponsors. Patients with insomnia incur more than double the total healthcare costs compared to those without. These costs arise not only from direct medical expenses but also from indirect factors such as lost productivity (presenteeism), missed workdays (absenteeism), and increased accident risks in workplace settings.

Plan sponsors are urged to reconsider their strategies for identifying, treating, and managing sleep disorders, particularly within populations that include polychronic patients, who account for 48% of total healthcare costs while representing just 17% of commercial populations.

Actionable Steps

To address these growing concerns, Risk Strategies Consulting advocates for a comprehensive, integrated care model for managing insomnia. Below are four actionable steps stakeholders (inclusive of plan sponsors, health plans, and PBMs) can take:

1. Expand Access to Evidence-Based Treatments

With only 659 certified CBT-I providers in the United States,3 significant barriers exist for individuals seeking this form of therapy. Employers and plan sponsors should explore digital alternatives such as FDA-cleared Prescription Digital Therapeutics (PDTs). Digital CBT-I offers accessible and effective care, demonstrating promising long-term outcomes such as reduced insomnia severity and higher remission rates.

2. Update Formulary Coverage

Adding digital CBT-I to health plan and PBM formularies can transform access to first-line therapy. Combined with stringent drug utilization reviews (DUR) for controlled substances, this step will reduce reliance on high-risk medications and prioritize safer, more effective alternatives.

3. Implement Care Coordination Strategies

Collaborating with pharmacy benefit managers (PBMs), health plans, and behavioral health plans to identify patients at risk and intervene early is essential. This includes retrospective reviews of prescriptions exceeding duration guidelines and establishing clinical workflows to encourage the use of non-pharmacological therapies.

4. Leverage Data Analytics

Utilizing claims data to proactively identify the polychronic populations most at risk due to untreated insomnia is important. Analytics can also help track adherence rates to recommended treatments and identify areas requiring organizational intervention, such as capturing the use of controlled substances in excess of clinical guidelines.

Why Comprehensive Care Matters

Insomnia is more than just losing sleep. When misdiagnosed or improperly treated, its effects cascade into a host of challenges for both individuals and organizations alike. For a more in-depth look at the issue, access our white paper Insomnia: The need for an integrated care approach.

At Risk Strategies Consulting, we specialize in helping organizations bridge critical care gaps. By harnessing data-driven insights and decades of expertise, we partner with plan sponsors, payers, and providers to build tailored strategies that improve workforce well-being while reducing healthcare expenditures.

Our team of consultants, actuaries, pharmacists, data scientists and other experts are uniquely positioned to help your organization address complex health challenges efficiently and effectively. By prioritizing innovative, evidence-based solutions, we assist stakeholders in realigning their care paradigms to achieve better health outcomes.

Visit us at riskstrategies.com/consulting.

  1. American Psychiatric Association. Sleep-wake disorders. In: Diagnostic and Statistical Manual of Mental DSM-5-TR. American Psychiatric Association Publishing; 2022. doi:10.1176/appi.books.9780890425787
  2. Sateia MJ, Buysse DJ, Krystal AD, Neubauer DN, Heald Clinical Practice Guideline for the Pharmacologic Treatment of Chronic Insomnia in Adults: An American Academy of Sleep Medicine Clinical Practice Guideline. J Clin Sleep Med. 2017;13(02):307-349. doi:10.5664/jcsm.6470
  3. Thomas A, Grandner M, Nowakowski S, Nesom G, Corbitt C, Perlis ML. Where are the Behavioral Sleep Medicine Providers and Where are They Needed? Behav Sleep Med. 2016;14(6):687-698. doi:10.1080/15402002.2016.1173551