The Performance Tax Every Company Pays

Written by Matt Levin, Chief Executive Officer, Modern Health

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I’ve spent countless hours this year talking with business and people leaders, and there’s a moment in those conversations I’ve come to expect. Someone pulls up their claims data, their leave of absence stats, their turnover trend, and then says some version of: how did we get here?

Every company tracks lagging metrics like payroll, revenue, turnover, and health care claims. Far fewer measure the leading indicators that influence those results long before they appear on a financial report.

Workforce mental health is one of those leading indicators—but only if employers are actively investing in support that shapes it. My view is that the real test for employer-provided mental health benefits is whether they  strengthen performance, manager capacity, engagement, and retention, while ultimately reducing downstream outcomes such as disability leave and health care costs.

It’s clear to me that every organization absorbs some version of this cost: capable employees operating with less focus, patience, and resilience than their work requires, because distress is drawing down capacity faster than it can be restored.

This is the Mental Health Performance Tax. I call it a tax deliberately because it behaves like one—assessed continuously, compounding when ignored, and paid by every organization whether they track it or not. 

You won't find that cost in a single budget line.

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What this cost looks like in practice

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Consider an employee who has been feeling somewhat anxious and having a difficult time sleeping  for a few weeks. They're still working. They're still showing up to meetings and seem to be getting things done. But the effects are already taking hold: less patience, weaker concentration, and more effort required to do the same work well. 

The impact on the organization starts there. This can look like a missed deadline or a decision that needs to be revisited. The overwhelmed, exhausted employee is calling out sick or struggling to show up on time and this reverberates through their entire team.

These individual moments may not stand out as significant expenses as they’re happening, but combined over time, the cost adds up. This is how the Mental Health Performance Tax accumulates: not through one dramatic event, but through thousands of small reductions in human capacity.

And here’s the part I’d push leaders hardest on. Most of this cost isn’t coming from the relatively smaller number of employees with severe behavioral or mental health concerns. Companies pay in smaller, repeated installments through a much larger group of employees who are still performing, but with less capacity to meet the demands of their roles.

Our recent workforce research points to the scale of that strain. The data showed that:

• 52% reported anxiety or panic-like symptoms in the past month
• 63% said they'd turned to alcohol, THC, or unprescribed medication to cope with work stress in the past year
• 84% said burnout is affecting their productivity

Eighty-four percent. Sit with that one. The business impact is beginning long before most organizations are equipped to measure it.

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Why the old framework falls short

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For years, employers approached mental health primarily as a downstream health care issue. It helped normalize care and expand access to therapy and other forms of clinical support.

But that approach also has a built-in limitation. Many of the metrics employers watch most closely, including claims, disability-driven leave of absence cases, and turnover, are late signals. By the time they move, the pressure affecting day-to-day performance has often been there for months.

That's part of why I’ve noticed the market conversation shifting. Employers, consultants, and finance leaders are asking harder questions about value: whether a mental health strategy reduces fragmentation, helps employees find appropriate support, and improves outcomes tied to the business. Those are far better questions than the ones I was getting asked three years ago. 

Because if employees don't discover support until they're already overwhelmed, much of the Mental Health Performance Tax has already been paid.

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Where the larger opportunity sits

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There’s a common assumption in workplace mental health that the greatest opportunity for impact sits with supporting the highest-acuity population. Those employees deserve excellent care, and they absolutely should get it.

But from a workforce perspective, they're only a fraction of the employee population. There’s also a much larger group whose mental health and well-being may be affecting their capacity well before they reach that level of need.

What strikes me is how much of this strain can sit below the threshold we typically associate with a serious mental health concern. Some employees will experience severe conditions that require high-quality, intensive care. Many more will go through periods when poor sleep, caregiving pressure, chronic pain, financial strain, sustained change, or an expanding manager role steadily draw on their capacity without becoming an obvious crisis.

Those pressures might not seem urgent on their own. Together, they erode the same reserve of attention, judgment, and patience that work depends on.

There’s nowhere where that’s clearer to me than at the manager level. Senior managers describe the role as harder than it’s ever been—82% say so directly. Many also say they’re pushing through their own mental health challenges rather than stepping back (72%), even though only 37% feel equipped to identify burnout on their own teams. 

The strain shows up in the data on diagnoses, too: 40% of senior managers received a new mental health diagnosis in the past year, compared with 13% of non-managers—a three-to-one gap. It’s another reason to think about manager support earlier, rather than waiting until the weight they’re carrying feels too heavy to manage.

And it matters disproportionately, because managers are often the first people absorbing workforce strain in real time. Managers are the multiplier: when their capacity goes, the tax rate on the rest of the team goes up right along with it. 

So, the practical implication is straightforward: a large share of the cost comes from a broad population whose performance is being steadily reduced long before they would identify themselves as needing mental health care. That's where the largest share of the Mental Health Performance Tax accumulates.

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A better leadership question

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If I could get every leadership team to answer one question, it would be this one: how do we help employees maintain the capacity to perform before pressure or distress becomes a larger health or business problem?

Ideally, organizations start with the work environment itself: building cultures, teams, and ways of working that support people in doing their best work. They make sure the right support is available when employees need it.

In practice, that can mean training managers to lead through change and discuss emotional well-being with their teams, while also giving employees multiple ways to engage based on what they’re going through. Coaching, therapy, group support, high-acuity care, self-guided tools, and other low-barrier options all have a role to play across the different mental health needs.

Employees might need help improving sleep, changing substance use, building communication skills, or addressing more significant concerns. 

To be clear, the answer isn’t to treat every difficult life experience as a clinical need. It's to make support easier to reach before strain becomes harder and more expensive to reverse.

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What success should be measured against

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If the opportunity is to preserve workforce capacity earlier, then we have to measure whether we’re succeeding at it. This is where I’d challenge my own industry. 

Utilization is an important operational metric, but it isn't the outcome employers are ultimately buying. The better question is whether support is strengthening manager capacity, helping employees stay productive through change, reducing avoidable leave and turnover risk, and improving health-related costs over time.

That's also where the financial case gets more interesting, because the evidence increasingly points to meaningful opportunity beyond the highest-acuity population. 

Peer-reviewed research on employees receiving coaching within a blended care model found that 72% of those with moderate needs improved or recovered clinically, often within two to three sessions. A third-party actuarial analysis—benchmarked against MarketScan national claims data of more than 13,000 members—found up to $2.39 in health care savings for every dollar invested, with 60% of that value coming from employees with moderate needs rather than the highest-acuity group.

I’m not arguing that every employer should evaluate workforce mental health in exactly the same way. I am arguing that a meaningful share of the value sits earlier in the timeline than most organizations are currently built to track.

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The tax is already there

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Here’s where I’ll land. Every organization is already paying some version of this tax. That part isn’t a choice. 

But leaders do have a say in how much that tax ultimately costs the business. They can wait for the cost to surface in weaker performance, more leave, higher turnover, and rising health care costs. Or they can offer support earlier, while there’s still time to interrupt that pattern and preserve the workforce capacity their business depends on.

Some strain is unavoidable. Letting its costs compound doesn’t have to be.

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