NCCI released its April 2026 Medical Inflation Insights report on April 24, updating the Workers Compensation Weighted Medical Price Index (WCWMI) with data through Q1 2026. The headline finding: medical equipment and supply prices accelerated in early 2026, with NCCI attributing the spike to “tariff-related impacts on prices.” While overall WC medical price growth moderated in the first quarter, NCCI warns the low pace “is unlikely to be sustained” and forecasts a return to 2024-2025 trend levels in the second half of the year.
The report also notes a divergence between the consumer-paid medical cost index (CPI) and the producer-paid index (PPI), with the CPI outpacing the PPI. NCCI says this gap warrants monitoring given potential shifts in payer mix that could affect who absorbs the cost increase.
Who it affects
Self-insured employers with active workers’ compensation programs, particularly those in manufacturing, construction, and logistics where musculoskeletal injuries frequently require durable medical equipment (DME), orthopedic implants, and surgical supplies. Programs with a high proportion of open medical-only claims are most exposed because those claims are dominated by equipment and treatment costs rather than indemnity payments. Captive and large-deductible programs retaining medical severity risk within their retention layer face the same pressure.
The reserve mechanism
This is a severity driver. Medical equipment and supply costs feed directly into the medical component of WC severity trend selections. When an actuary picks a medical severity trend of, say, 4% to 5%, that trend implicitly assumes a stable mix of price growth across hospital services, physician fees, pharmaceuticals, and equipment. If tariffs push equipment and supply prices materially higher while other components hold steady or decline (NCCI notes prescription drug prices actually fell in early 2026), the composite trend may still look moderate even though the equipment-heavy slice of the claim mix is accelerating.
The compounding factor is utilization. NCCI’s report notes that accident year 2024 medical severity grew approximately 6%, driven in part by increased utilization. Price acceleration layered on top of utilization growth means the two components of severity (price times volume) are both moving upward. For immature accident years in a Bornhuetter-Ferguson or expected-claims model, the expected loss pick absorbs the majority of the estimate. If that pick was set using pre-tariff trend data, it will understate the ultimate for every open accident year with remaining medical development.
Hospital outpatient price growth, the largest component of the WCWMI, moderated in early 2026 but recent monthly data has already reverted to the longer-term annualized trend of approximately 3.5%. That reversion, combined with equipment cost acceleration, suggests the Q1 moderation was temporary rather than structural.
What to ask your actuary
- Does our current medical severity trend selection account for tariff-driven cost acceleration in medical equipment and supplies, or is it based entirely on pre-2026 data that misses this inflection?
- Given NCCI’s forecast that the early-2026 moderation in WC medical prices will not hold, should we stress-test our unpaid claim estimates using a higher medical severity trend for accident years 2025 and 2026?
- For open claims with ongoing DME or surgical supply costs, are case reserves reflecting current equipment pricing, or are they anchored to fee schedules that have not yet incorporated tariff pass-through?
What to watch next
The Q2 2026 WCWMI update, expected in July, will show whether the tariff-driven equipment price acceleration sustained through the spring or reversed as supply chains adjusted. Before that, the BLS April CPI release on May 12 will provide the next read on broader medical inflation, including the hospital services sub-index that ran at 6.4% in March. If both the NCCI equipment signal and the BLS hospital signal remain elevated, the case for revising medical severity trend assumptions at mid-year reserve reviews becomes difficult to defer.