Workers' Comp Medical Inflation Is Compounding Inside Your Mod
WCRI's 2026 Medical Price Index shows WC medical costs rising faster than the price index alone predicts. For Southeast contractors, that gap compounds inside your mod.
Workers' comp medical severity rose 4% in 2025, outpacing the NCCI Weighted Medical Price Index of 2.2% (NCCI, May 2026). The WCRI Medical Price Index shows non-fee-schedule states saw 43% cumulative price growth since 2008, more than double fee-schedule states (WCRI, May 2026). For Southeast contractors, medical costs compound across the three-year experience period, inflating the mod even when claim counts stay flat.
Medical claim severity rose 4% in 2025 (NCCI, May 2026). By itself, that number sounds manageable. But your experience modification rate (EMR, also called "the mod") doesn't see a single year. It sees three. And 4% compounded over three years of your experience rating window changes the math.
The WCRI (Workers Compensation Research Institute) Medical Price Index, released in May 2026, adds context the NCCI number alone doesn't provide. Workers' comp medical inflation isn't just about what providers charge. It's about how much care each claim consumes. For Southeast construction contractors watching their mod, the distinction matters.
What WCRI's 2026 Medical Price Index shows
The 17th edition of the MPI-WC tracks professional medical service prices across 36 states from 2008 to 2025. The core finding: states without a workers' comp fee schedule saw prices grow 43% over that span, compared with 19% in states with fee schedules (WCRI MPI-WC, May 2026). That's a 2:1 ratio in cumulative price growth.
Most Southeast states operate fee schedules. Florida, Georgia, Tennessee, Alabama, and the Carolinas all cap what providers can charge for WC medical services. Fee schedules don't freeze prices. They moderate the pace. But even moderated growth compounds.
Florida's recent fee schedule overhaul makes the point. Senate Bill 362 raised physician reimbursement from 110% to 175% of Medicare for non-surgical services, and from 140% to 210% for surgical procedures, effective January 2025. That's a 59% jump for non-surgical codes in a single year (Florida SB 362, 2024). WCRI CompScope data shows medical payments per claim rose 4% in 2025 for claims with more than seven days of lost time (WCRI CompScope Florida, 2026). Total cost per claim climbed 5%.
The fee schedule increase was designed to improve provider access for injured workers. It also added a medical cost layer that flows directly into future experience rating calculations.
How medical inflation compounds inside your mod
Your mod uses three years of loss data. NCCI's formula weights both the number of claims (frequency) and the cost of those claims (severity). Medical costs sit inside total incurred losses on your worksheet.
A 4% annual increase in medical severity doesn't add 4% to your mod. It adds 4% to the medical portion of every open claim, for every year that claim remains in your experience period. Claims incurred in year one carry three years of medical cost growth before they roll off.
NCCI reported that overall medical cost per claim rose 6% between accident years 2023 and 2024 (NCCI, May 2026). Utilization drove four percentage points of that increase. Price accounted for the other two. NCCI also flagged a 6% increase in the share of claims involving an inpatient stay, a shift in claim mix that pushes medical costs higher independent of any fee schedule.
For a construction contractor at a 0.85 mod with $4 million in payroll, these shifts aren't abstract. In our reviews of Southeast contractor worksheets, medical reserves on older claims are almost always the piece that's drifted furthest from reality. A single claim that started as a $30,000 medical reserve can grow to $35,000 or more over the experience period without any change in the worker's condition. That reserve growth hits your mod at each annual valuation date.
The gap between price and severity is the signal
The NCCI Weighted Medical Price Index (WCWMI) sat at 1.8% year-over-year in March 2026, below its one-year average of 2.2% and three-year average of 2.6% (NCCI, Q1 2026). That looks like cooling. NCCI says otherwise: the 1.8% reading "is unlikely to be sustained" and will trend closer to 2024 and 2025 levels later this year.
Here's what matters for your mod. Medical severity grew 4%. The price index grew roughly 2%. The gap is utilization: more inpatient stays, more complex treatment protocols, a shifting claim mix. Your worksheet doesn't distinguish between a cost increase driven by price and one driven by utilization. It records the incurred number. That's it.
Indemnity severity also grew 4% in 2025, roughly matching wage growth (NCCI, May 2026). That's expected and predictable. Medical severity outrunning the medical price index is neither. The cost pressure on your mod is coming from how injuries are treated, not just what providers charge per visit.
What an audit would check
An audit would examine whether medical reserves on your worksheet reflect current treatment costs or stale estimates set when the claim first opened. It would look at whether incurred values on claims nearing the end of your experience period have been updated to match actual paid figures. It would also check whether medical-only claims are properly coded to receive the 70% Experience Rating Adjustment (ERA) discount that NCCI applies to claims without lost time.
If your mod is climbing and your claim count is flat, send us your worksheet for a free review and we'll show you where the medical inflation is hiding.