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Workers Comp Medical Inflation – NCCI Says Not Really


Workers Comp Medical Inflation Much Lower Than CPI

Workers Comp medical inflation does not equal overall inflation. The following numbers surprised me. 

I was watching a presentation hosted by NCCI on a multi-rating bureau view of COVID-19 yesterday. I decided to check out some of the articles that NCCI had on their website that would be good information for the WC community.

As usual, it did not take long to find a great article that should make claims adjusters, actuaries, and underwriters rethink how much the current inflation trends should affect setting or increasing the medical reserves on files.

Using Inflation To Justify Higher Medical Reserves 

In our loss run and file reviews for clients, one of the justifications for increased reserves is inflation.  If one goes here and reads the NCCI article, then that justification may not hold water.   This situation could change over the next few years, but I doubt it. 

One component of the articles that I liked was the sliders/pull-down menus where comparisons can be made for all the NCCI states.  

Workers Comp Medical Inflation – Key Observations

According to the article: 

  • Medical inflation in WC has been moderate for the past decade. But with the recent dramatic rise in consumer prices, concerns have emerged about medical inflation rising at similar levels.
  • Two factors drive changes in medical claims costs: the price of medical services and utilization, which measures the mix and number of services provided to an injured worker.
  • NCCI’s most recent medical data shows that drug costs are declining, physician costs are up slightly, and facility costs are rising in the WC system.
  • In recent years, facility services are the dominant contributor to changes in WC medical costs across regions—most prominently in the Southeastern region.
chart graph workers comp medical inflation
(c) NCCI, Boca Raton FL – used with permission

The CPI-M figure according to the Bureau of Labor Statistics (BLS) is

The medical care index is one of eight major groups in the Consumer Price Index (CPI) and is divided into two main components: medical care services and medical care commodities, each containing several item categories. Medical care services, the larger component in terms of weight in the CPI, is organized into three categories: professional services, hospital, and related services, and health insurance. Medical care commodities, the other major component, include medicinal drugs and medical equipment and supplies.

A quick look at the above NCCI chart shows that workers comp medical inflation has been much lower than the overall general economic medical cost inflation over the past 10 years.  The CMS actuarial team even thought that medical inflation was going to tally at 2.5% after 2023.   

How To Use This Information – Bottom Line

Medical costs in a workers comp file previously covered 40% or less of the file payouts.  Now, it has approached 70% over the last few years.  Adjusters, actuaries, underwriters, agents, and other insurance personnel should not equate overall economic inflation at 9.1% as workers comp medical inflation. 

Employers should pay attention if, on a workers comp loss run, the medical reserves seem high. 

The graph above says it best – overall inflation now outpaces workers comp medical inflation by a significant amount that should not be appearing in medical reserving. 

Related: Third Party Administrator Adjusts Workers Comp Claims For Self Insureds



James J Moore - Workers Comp Expert

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Management Consultants, Inc. in 1996. J&L’s mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

James has over 27 years of experience in insurance claims, audit, and underwriting, specializing in Workers’ Compensation. He has supervised, and managed the administration of Workers’ Compensation claims, and underwriting in over 45 states. His professional experience includes being the Director of Risk Management for the North Carolina School Boards Association. He created a very successful Workers’ Compensation Injury Rehabilitation Unit for school personnel.

James’s educational background, which centered on computer technology, culminated in earning a Masters of Business Administration (MBA); an Associate in Claims designation (AIC); and an Associate in Risk Management designation (ARM). He is a Chartered Financial Consultant (ChFC) and a licensed financial advisor. The NC Department of Insurance has certified him as an insurance instructor. He also possesses a Bachelors’ Degree in Actuarial Science.

LexisNexis has twice recognized his blog as one of the Top 25 Blogs on Workers’ Compensation. J&L has been listed in AM Best’s Preferred Providers Directory for Insurance Experts – Workers Compensation for over eight years. He recently won the prestigious Baucom Shine Lifetime Achievement Award for his volunteer contributions to the area of risk management and safety. James was recently named as an instructor for the prestigious Insurance Academy.

James is on the Board of Directors and Treasurer of the North Carolina Mid-State Safety Council. He has published two manuals on Workers’ Compensation and three different claims processing manuals. He has also written and has been quoted in numerous articles on reducing Workers’ Compensation costs for public and private employers. James publishes a weekly newsletter with 7,000 readers.

He currently possess press credentials and am invited to various national Workers Compensation conferences as a reporter.

James’s articles or interviews on Workers’ Compensation have appeared in the following publications or websites:

  • Risk and Insurance Management Society (RIMS)
  • Entrepreneur Magazine
  • Bloomberg Business News
  • WorkCompCentral.com
  • Claims Magazine
  • Risk & Insurance Magazine
  • Insurance Journal
  • Workers Compensation.com
  • LinkedIn, Twitter, Facebook and other social media sites
  • Various trade publications


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