OBJECTIVES: We sought to evaluate the impact of diabetes prevention costs and effectiveness on the projected return on investment (ROI) from the perspectives of a US health care payer and a large, self-insured employer using an improved risk stratification tool. METHODS: A model comprised of a closed cohort with four Markov health-states was developed to project diabetes-specific costs and offsets due to incident diabetes and utilization of prevention resources. Subjects identified as “at-risk” for diabetes in an annual health risk appraisal would be tested and stratified into high or moderate-to-low risk groups. Parameters of the screen for at-risk subjects were based upon published impaired fasting plasma glucose prevalence of an insured US population. High risk subjects optionally enter a diabetes prevention program. Parameters for the risk stratification test were based upon published data for a multiple biomarker risk assessment test (PreDx DRS). Cost inputs included direct and indirect medical costs of diabetes and pre-diabetes, and the cost of stratification testing ($250). A range of intervention costs and effectiveness were examined. Model outputs included projected costs, savings, and number of life years and diabetes-free years saved.  RESULTS: At a published annual prevention program cost of $850 and intervention effectiveness of 58%, employers would see a positive ROI by year 2 that increases through year 5. Savings at year 5 represent a return of $1.71 for every $1 spent on diabetes prevention, with 167 diabetes cases prevented, 547 diabetes-free years and 6.3 life years saved per 10,000 employees. Payers could achieve cost savings at lower program costs and/or increased effectiveness. The ROI depends strongly on reported intervention effectiveness in the range  of 31%-72% and is moderately sensitive to cost variations. CONCLUSIONS: Cost savings for employers and payers are possible using risk stratification in conjunction with an effective prevention program to reduce diabetes incidence.