Although information exists in the form of projected costs, limited data are available on the overall cost of illness resulting from varicella‐zoster virus (VZV) infection. VZV is usually a benign childhood illness, but reactivation of latent VZV can lead to serious complications. OBJECTIVE: To assess via medical claims the costs associated with VZV infection and its resultant complications from the payers' perspective. METHODS: We conducted a retrospective database analysis of 73,869 managed care members continuously enrolled throughout calendar year 1999. Records of members with a diagnosis code of either primary varicella (ICD9‐052) or herpes zoster (ICD‐053) were selected. Data was extracted and cost information was tallied for all medical claims including inpatient hospitalizations, primary care visits, specialist visits, emergency department visits, and specialty procedures. Cost data are reported in 1999 US dollars. RESULTS: In 1999, a total of 119 patients were diagnosed with varicella (52%) and herpes zoster (48%). The mean cost to the payer was $496.77/patient. The average amount paid out for members with varicella was $181.87. The average cost per member with herpes zoster was $786.27. Sixty‐two (52%) VZV afflicted members were diagnosed with varicella while 57 were diagnosed with herpes zoster. The amount paid for members over age 19 (n = 56) was $640.30/patient. Of these patients, 14% were classified with varicella infection, whereas 86% were classified as having zoster. For members aged <19 (n = 63), the mean amount paid was $369.18/patient. In this group, 78% were diagnosed with varicella infection, whereas 22% were diagnosed with zoster. CONCLUSION: The above costs document for the first time the true cost of VZV infection from the payers' perspective. Further efforts to expand vaccination programs should take these costs into consideration.