OBJECTIVE: The aim of this study was to evaluate the relationship between exercise frequency and health care costs associated with medical and pharmacy claims among a 10-year employee cohort. METHODS: The relationship between self-reported exercise (days/week) and health care costs was analyzed with negative binomial regression, using an integrated database involving 32,044 person-years and linking employee demographics, health risk appraisal information, and health insurance claims. RESULTS: An association demonstrating exercise frequency lowering health care costs was present in most medical and prescription drug categories and was strongest among employees reporting 2 to 3 and 4 to 5 days/week of exercise. Increased exercise was associated with statistically significant reductions in endocrine disease costs and gastrointestinal prescription drug costs. CONCLUSIONS: This cohort demonstrates lower health care costs in employee populations when exercise frequency is increased. Employers may lower modifiable risk factors for chronic disease and reduce health care costs by promoting exercise among their employee population.