The effect of insomnia on next-day functioning, health, safety, and quality of life results in a substantial societal burden and economic cost. The annual direct cost of insomnia has been estimated in the billions of US dollars and is attributed to the association of insomnia with the increased risk of certain psychiatric and medical comorbidities that result in increased healthcare service utilization. It is well known that psychiatric conditions, anxiety and depression in particular, are comorbid with insomnia. However, emerging data have shown links with several common and costly medical conditions such as heart disease and diabetes. Furthermore, studies show that patients who have insomnia have more emergency department and physician visits, laboratory tests, and prescription drug use than those who do not have insomnia, increasing direct and indirect consumption of healthcare resources. Insomnia also has been shown to negatively affect daytime functioning, including workplace productivity, as well as workplace and public safety. These daytime effects of insomnia are translated into indirect costs that are reportedly higher than the direct costs of this disorder. These observations have significant implications for managed care organizations and healthcare providers. Improvements in diagnosing and treating insomnia can significantly reduce the healthcare cost of insomnia and its comorbid disorders, while providing additional economic benefits from improved daytime functioning and from increased productivity.