With employee mental health among employers’ top workforce concerns, some HR leaders are starting to seek solutions that are outside the box. Among the more nontraditional strategies employers are considering? Ketamine treatments and psychedelic-assisted therapy, which involves the supervised use of small doses of mushrooms, ecstasy or LSD.

Driven by employee interest, a small but growing number of employers are incorporating coverage for such therapies into their health plans to help workers manage mental health conditions that haven’t improved with traditional treatments, says Paul Fronstin, director of health benefits research at the Employee Benefit Research Institute (EBRI).

In fact, last year, 17% of U.S. employers said they had invested in psychedelic-assisted clinical therapy for their employees, according to a survey of more than 500 employee benefits decision-makers by benefits consultant NFP.

Possible solution to a mental health crisis

In 2022, mental health benefits and insurance start-up Enthea became the first licensed provider of health benefit plans offering employers ketamine-assisted therapy treatments as an ancillary benefit offering, currently its only offering. Ketamine, which technically falls outside of the psychedelics category, is a dissociative drug approved by the FDA for use in general anesthesia. Like some other FDA-approved drugs that the manufacturer later discovers can provide unrelated benefits—such as diabetes medication Ozempic, now being used for weight loss—ketamine is now also recognized for its potential to combat treatment-resistant depression, PTSD and addiction.

Over the past two years, Enthea’s customer base has grown from one employer with about 200 employees to 20 employers representing more than 150,000 employees, says Sherry Rais, CEO of Enthea. By late September, Enthea plans to expand its health plans to cover psychedelic-assisted therapy treatments in the few states where it is allowed.

Currently, federal law makes psychedelics like MDMA, LSD and psilocybin illegal to possess or consume. However, two states have adopted laws permitting the use of some psychedelics for therapy, and similar efforts are underway in a handful of other states as interest in psychedelics gathers steam around the country.

According to the UC Berkeley Center for the Science of Psychedelics, more than 60% of Americans believe the drugs should be allowed for regulated therapeutic use, while nearly half think Americans should be able to use the drugs recreationally.

This comes amid continued concerns about mental health both inside and outside of work: 90% of Americans believe the nation is in a mental health crisis, and 77% of employers report a rise in their workforce’s mental health needs, according to a 2024 Health Care Strategy Survey by Business Group on Health.

In response, 94% of large employers have strengthened their mental healthcare coverage with new offerings in the past three years, according to a 2023 Mercer survey of more than 300 employers.

HR leaders may be exploring nontraditional offerings like psychedelic- and ketamine-assisted therapy treatments in part because of the significant business impact of employees’ untreated mental illness, says Rais. Unchecked mental health conditions can cost employers $3.7 trillion each year in failed treatment costs, lost productivity and absenteeism, according to HealthCanal.

About ketamine and psychedelics

Esketamine, derived from ketamine and used as a nasal spray, was approved by the FDA in 2019 to combat treatment-resistant depression. Although ketamine has yet to be approved by the FDA to treat similar mental health conditions as Esketamine, ketamine treatment centers have sprung up across the nation.

Ketamine can help with treatment-resistant depression as well as reducing anxiety, social adjustment disorder and substance abuse through a combination of therapy and the drug, according to a BJ Psych Open report. Research studies have shown ketamine can have a rapid effect on depression compared to conventional pharmacotherapy, which usually takes four to 12 weeks before symptoms improve, according to an Indian Journal of Psychiatry report.

As for psychedelic-assisted therapy, psilocybin, the active ingredient in “magic” mushrooms, can be used to treat mental health conditions like major depression. Oregon is the only state in the nation where licensed psilocybin providers operate. There, treatment centers offer licensed facilitators who prepare patients for their hallucinogenic experience, stay with the patient during the process and then assist the patient in integrating that experience according to their mental health treatment plan.

A recent Johns Hopkins study of psilocybin found approximately 30% of treatment-resistant patients with major depressive disorders could keep depression at bay for up to a year after taking the drug.

Other psychedelics undergoing testing to treat mental health issues include MDMA (also known as ecstasy and molly) for post-traumatic stress syndrome and LSD for reducing anxiety.

Starting in 2017, the Food and Drug Administration granted breakthrough therapy designations for some psychedelics, including psilocybin, MDMA and LSD. The designation allows a manufacturer to expedite the development and review of their drugs because they treat a severe condition. Full FDA approval of the drugs for therapeutic use could drive federal legalization. The FDA is expected to issue a final decision in mid-August on whether MDMA can be used to treat PTSD. 

Some states have already passed or are seeking to pass legislation to legalize psilocybin service centers, as Oregon did in 2020 and Colorado did in 2022.

“We’re hoping employers in those states will start to see the benefits of these services and see it as an employee benefit to help reduce the costs of those services for their employees,” says Britt Rollins, CEO of the National Psychedelics Association.

Other states are also moving to legalize psychedelics for treatment, Rollins notes, including Massachusetts, Illinois, Utah and California.

ROI on psychedelic-assisted therapy

Employers with over 100 workers likely will notice cost savings when allowing employees to use ketamine-assisted and psychedelic-assisted therapy treatments, says John Tillery, co-founder and partner of insurance broker Whiteboard Risk and Insurance Solutions and a customer of Enthea.

For example, traditional treatment for depression could involve twice-a-month therapy sessions and antidepressant medication at an employer cost of about $12,000 to $14,000 a year, Tillery says.

Large employers would pay substantially less for a complete course of ketamine treatment for depression, Enthea’s Rais says. The cost to employers—for three preparation, six administration and eight integration sessions—would range from $2,400 to $8,000, depending on the location and other factors, Rais says. Annual follow-up sessions, if needed, would cost employers about $500, she says.

Employers with fewer than 100 employees, such as Whiteboard Risk and Insurance Solutions with 50 employees across the globe, would pay more for a complete ketamine treatment course, Tillery says.

Regardless, Whiteboard signed up with Enthea a month ago for healthcare coverage of ketamine-assisted therapy. If the FDA approves the other psychedelics like psilocybin and MDMA for therapeutic use, Tillery says, Whiteboard will include those in its health plan, too.

“For me, people come and choose to work for us and spend most of their lives with us. So, we’re trying to provide the highest-quality employee benefits,” he says. “We’ve probably had about eight employees go through some kind of psychedelic-assisted therapy like ketamine, and the results have been life-changing for all of them.”

Challenges to offering psychedelic-assisted therapy

Among the factors that may hold some employers back from covering psychedelic- or ketamine-assisted treatments are questions about what it means within society to offer this coverage.

“When we were growing up, there was a very strong campaign on the war on drugs,” Rais says. “But it’s very inaccurate to encapsulate all drugs under that campaign. So, the challenges are rewiring and changing how people think about those medicines.”

Employers also may face questions about safety, concerns that escalated following the death last year of actor Matthew Perry due to “acute effects of ketamine,” according to the Los Angeles Medical Examiner’s Office.

“No employer wants a story associated with them about offering a benefit involving [ketamine] and then having something negative happen like what happened with Matthew Perry,” Fronstin says.

The future of psychedelic healthcare coverage

Although employer interest is increasing, it is still in its infancy, says Fronstin.

“We’re sort of at the beginning of a trend right now, and trends tend to start with small numbers, which is where we are at right now. We’re at a point where we’ll start to see if this becomes a mainstream benefit or not,” says Fronstin. “It’s too soon to predict where it will go.”

But if the FDA approves MDMA to treat people with post-traumatic stress disorder, it may lead to a substantial change in employers covering such therapies, he notes.

“FDA approval could be a defining moment for this benefit,” Fronstin says. “The legal issues have to be resolved, but that doesn’t mean the benefit is going to take off once it’s approved.”

Many employers don’t want to be the first to roll out a new benefit, he says, preferring to watch how it works for others. He added, “There’s a lot of change happening and we’ll have to see where psychedelics go.”