Construction Medical Severity Just Jumped 13%: What It Means for Your 2027 Mod
NCCI's 2026 State of the Line data shows construction medical severity spiked 13% in Accident Year 2024. That's the worst of any industry, and it hits the mod formula where it hurts most.
Construction lost-time medical severity jumped 13% between Accident Year 2023 and 2024, the largest increase of any industry (NCCI, May 2026). The experience rating formula gives full weight to primary losses (dollars below your state's split point), and rising claim costs push more into that bucket. For Southeast contractors, this means measurably higher 2027 mods from claims that would have cost far less two years ago.
NCCI's (National Council on Compensation Insurance) 2026 State of the Line data included a number that should concern every construction contractor watching their Experience Modification Rate (EMR, also called "the mod"). Medical severity in the construction sector jumped 13% between Accident Year (AY) 2023 and AY2024 (NCCI, May 2026). That's the worst of any industry.
The number itself isn't surprising if you've been tracking workers' comp medical inflation. What's different is where those extra dollars land inside the mod formula.
Why 13% hits harder in construction
Construction already carries the highest lost-time medical claim severity of any industry. The 13% increase in AY2024 isn't a spike from a low base. It's a jump from the top.
NCCI's data shows that over half of the top 10 construction class codes saw double-digit increases in medical severity between AY2023 and AY2024 (NCCI 2026 SOL Guide). Only three construction classes saw severity decrease. The trend isn't isolated to one trade; it's spread across multiple major classification codes.
For context: all-industry medical severity rose roughly 4% over the same period (NCCI, May 2026). Construction's 13% was the single largest contributor to that systemwide figure, driven by the sector's size and the sheer magnitude of its increase.
How construction medical severity flows through the mod formula
The experience rating formula doesn't treat every dollar of a claim the same way. Each claim gets divided at a threshold called the split point. Dollars below that line are "primary losses." Dollars above it are "excess losses." Primary losses carry full weight in the mod calculation. Excess losses carry only partial weight.
That distinction matters enormously when severity rises.
Under the old NCCI methodology, every state used the same $18,500 split point. Since November 2023, NCCI has rolled out state-specific split points calibrated to each state's average claim costs (NCCI, 2023). The target is to set each state's split point at roughly 40% of its average lost-time claim cost. Southeast states now sit in a range that reflects their local claim profiles.
The dollar impact shows up clearly on a worksheet. Two years ago, a medical claim on a Southeast contractor's mod might have settled at $25,000. With a split point around $22,000, about $22,000 would have landed in the primary bucket and $3,000 in excess. Today, that same injury type runs closer to $40,000, reflecting the 13% severity trend compounding on prior years. With a split point now at $24,000, the primary portion is $24,000 and the excess is $16,000.
The primary portion grew by $2,000. The excess grew by $13,000. But because primary dollars carry full weight in the formula, that $2,000 increase hits your mod harder per dollar than the $13,000 sitting in excess. For a contractor running $500,000 in payroll under a class code like 5403 (carpentry) or 5645 (residential construction), even a modest primary-dollar increase can shift the mod several points. Each mod point on that payroll represents real premium dollars at renewal.
One claim. A higher mod for three full years on your worksheet. And severity is still climbing.
The frequency offset is shrinking
Construction has one long-running piece of good news: claim frequency keeps falling. The rate of frequency decline in construction outpaces every other industry, with a cumulative drop of nearly 40% since 2015 (NCCI, May 2026).
But that decline is decelerating. Lost-time claim frequency across all industries fell just 2% in 2025, slower than the long-term average (NCCI, May 2026). Construction still leads the decline, but the cushion is thinner than it was five years ago.
When frequency drops fast enough, it offsets rising severity in the aggregate. Fewer claims mean fewer dollars entering the formula. But your mod doesn't measure industry aggregates. It measures your losses against what the formula expects for your class code and payroll size. If you have one claim and its severity is 13% higher than what the Expected Loss Rate (ELR) assumed, your mod moves. The industry-wide frequency decline helps shape the ELR tables. It doesn't help you own a $40,000 claim instead of a $25,000 one.
What an audit would check
An audit examines whether the claim values on your worksheet match what the carrier currently has on file, not what they were at an earlier valuation. It checks whether reserves reflect the actual medical treatment path and whether claim type classifications (medical-only versus lost-time) are accurate. That classification alone can shift a mod several points, and it's one of the most common errors we see on Southeast contractor worksheets.
Request a free worksheet review and we'll tell you where your mod stands before your 2027 rating date.