Why are workers' comp medical costs rising faster than general medical price inflation?

Unit medical prices in workers' comp grew roughly 2.5% in 2025, but total medical costs per claim grew 6% per year from 2022 to 2025. The gap reflects delivery costs: utilization review, case management, pharmacy management, and bill review. These administrative layers have been growing at rates well above unit price growth. WCRI data shows UR costs per claim growing 28% annually from 2021 to 2024, now accounting for roughly 25% of medical cost containment expense in WC.

What is utilization review in workers' comp and how does it affect my claim?

Utilization review (UR) is the process carriers use to evaluate whether proposed medical treatments are medically necessary before authorizing them. It applies to physical therapy, imaging, specialist referrals, and surgical procedures. While UR is intended to prevent unnecessary care, the administrative cost of running UR has grown substantially. Those costs appear in claim reserves and in the final paid amounts on closed claims, contributing to rising total claim costs independent of the treatment itself.

Can rising WC delivery costs increase my experience mod even if my injury count is the same?

Yes. The EMR formula compares your actual losses to expected losses for your payroll and classifications. When delivery costs like UR drive up the actual cost of your open and closed claims, your actual losses rise. If expected loss rates haven't been updated to reflect the new cost environment, the gap between actual and expected losses widens, and your mod moves upward. Fewer claims at higher per-claim cost can produce the same mod result as more claims at lower cost.

Does the reserve on my open WC claim include utilization review costs?

The reserve a carrier sets on an open claim reflects expected total cost, which includes delivery expenses. Carriers typically don't itemize UR costs separately in the reserve they report to NCCI for experience rating purposes. The reserve is a single projected total. As UR costs have risen, that total is higher for the same injury than it would have been several years ago, even before any medical treatment is completed.

Field ReportMay 16, 2026 · 4 min read

WC Medical Costs Rise 6% Per Year. Medical Prices Rose 2.5%. What's in the Gap?

WC medical costs rise at 6% per year. Unit prices grew 2.5%. The gap is friction: utilization review costs growing 28% annually, case management, and administrative overhead that stacks on every open claim.

By TraciThe Orson Group

Field Report

+28%

Annual growth in WC utilization review costs per claim, 2021-2024

WCRI Medical Cost Study

At a glance

Workers' comp medical costs grew 6% per year from 2022 to 2025 (WCRI CompScope 2026), while unit medical prices grew just 2.5% in 2025. The gap is friction: utilization review costs per claim grew 28% annually from 2021 to 2024, and UR now accounts for roughly 25% of medical cost containment expense in WC (WCRI). For contractors with open claims, these rising delivery costs inflate reserves and contribute to higher actual losses on the experience rating worksheet.

Workers' comp medical costs have been rising at 6% per year from 2022 through 2025 (WCRI CompScope 2026). That's not because a visit to an orthopedic surgeon costs 6% more each year. NCCI's weighted medical price index grew at about 2.5% in 2025, well below the overall claim cost trend.

The difference is friction. Costs layered on top of actual care: case management, utilization review, bill review, pharmacy management. These administrative costs don't treat injured workers. They manage the treatment of injured workers. And they've been growing faster than the care they oversee.

What utilization review is and why its cost matters

Utilization review (UR) is the process by which insurance carriers or managed care organizations evaluate whether proposed medical treatments for a WC claim are medically necessary and appropriate. A provider recommends physical therapy. UR approves or denies it. A surgeon recommends an MRI. UR reviews the request against clinical guidelines before authorizing it.

In theory, UR reduces unnecessary care and controls costs. In practice, UR itself has a cost: the staff, the systems, the review process, and the administrative time that physicians and employers spend navigating it.

WCRI data shows that UR costs per claim grew 28% annually from 2021 to 2024. The share of claims undergoing UR at the 12-month mark expanded from 27% to 57% across the same period. UR now represents roughly 25% of overall medical cost containment expense in workers' comp, up from 7 to 10% in earlier years (WCRI). The system is spending more to manage care than it used to, even as the underlying care hasn't grown proportionally.

Why this shows up in reserves

Carriers set reserves on WC claims based on expected total cost: medical payments, indemnity, and delivery expenses. UR costs are part of that delivery expense. As UR costs have grown, a carrier setting a reserve on an open claim in 2025 is estimating a higher total cost than a carrier setting the same reserve in 2019 would have, even for an identical injury with an identical treatment course.

That reserve inflation isn't visible from the outside. A contractor looking at their experience rating worksheet sees a dollar reserve on an open claim. What they don't see is the portion of that reserve attributable to anticipated UR costs rather than anticipated treatment costs. The distinction matters because UR costs are largely driven by the carrier's administrative structure, not by the specific injury.

The open claim compounding problem

In our reviews of Southeast contractor worksheets, the claims with the longest open periods generate the most reserve inflation relative to their ultimate paid amount. A soft-tissue injury that stays in managed care for two years accumulates UR costs across that entire period. The reserve at month 24 reflects expected remaining medical costs, expected remaining indemnity, and expected remaining UR costs on those remaining medical costs.

When the medical cost trend runs at 6% per year but unit prices grow at only 2.5%, the excess is coming from somewhere. For open claims in the experience window, that excess flows directly onto the contractor's experience rating worksheet as actual losses. The claim doesn't have to be unusual. A standard soft-tissue case staying open at 18 months has accumulated more administrative overhead than the same case would have four years ago, and the reserve reflects it.

How the EMR formula handles this

The Experience Modification Rate (EMR) compares actual losses to expected losses. Expected loss rates are set by NCCI based on historical industry experience and are updated periodically. If medical cost growth is running above historical expectations in a given state and class, the ELR may not have fully caught up yet.

When actual losses are elevated because of rising delivery costs but ELRs still reflect older, lower-cost benchmarks, the actual-to-expected ratio worsens, and the mod rises. It's not that the contractor had more claims. It's that each open claim is carrying more overhead than the formula was calibrated to expect.

What an audit would check

An audit examines open reserves on claims in the experience period to assess whether each reserve reflects a reasonable projection of that specific case, or a generic trend-indexed estimate that includes administrative cost growth not specific to the injury. It also looks at whether claims that appear medically stable are remaining open in managed care, accumulating UR costs that extend the reserve and inflate the mod without corresponding progress in the underlying case. A claim still under active UR at 20 months after injury is not unusual in this environment. Its reserve, however, may be carrying delivery costs that don't reflect where that specific case is headed.

If you have open medical claims in your experience window, send us your NCCI worksheet before your next renewal and we'll review whether the reserves are tracking the injury or the trend.