New York published proposed workers’ comp medical fee schedule amendments in the State Register on January 14, 2026, targeting evaluation and management (E&M) code increases for the first time in more than six years. Missouri’s SB 1052, now pending before the Senate General Laws Committee, would establish the state’s first formal maximum fee schedule, replacing a “fair and reasonable” reimbursement standard with no fixed ceiling. Kentucky updated its hospital cost-to-charge ratios effective April 1, 2026, recalibrating the conversion factors hospitals use to bill WC claims. Three states, three different mechanisms, one shared consequence: medical payments per claim are about to step up.
These reforms arrive after a prolonged period of fee schedule stagnation. Nationally, WC physician charges per unit grew roughly 20% between 2020 and 2026, according to a Claims Journal analysis of WCRI and NCCI data published May 27. Yet NCCI’s Workers Compensation Weighted Medical Price Index showed just 1.8% growth year over year in March 2026, a reading the agency itself called unsustainable. The gap between what providers charge and what fee schedules allow has widened for years in states that did not adjust annually. When the adjustment comes, it arrives not as a gradual trend but as a discrete jump.
Who it affects
Self-insured employers, public entities, and captives carrying WC medical exposure in New York, Missouri, or Kentucky face the most direct impact. New York is the largest of the three; its fee schedule freeze has contributed to a provider participation gap that Governor Hochul’s administration is now trying to close by expanding the eligible provider pool from 24,500 to over 200,000. Missouri self-insureds operating under the current “fair and reasonable” standard already contend with unpredictable medical costs, but a formal fee schedule will create a new, potentially higher, reimbursement floor. Kentucky’s update is narrower in scope (hospital charges only) but affects the inpatient and outpatient components that represent the highest per-claim cost.
Multi-state self-insured employers are especially exposed. A fleet operator, construction firm, or healthcare system with operations across these states will see medical severity trends diverge from their historical baselines in all three jurisdictions simultaneously.
The reserve mechanism: a medical severity step-change
Fee schedule increases directly raise the per-unit cost of medical services. For self-insureds whose actuarial studies rely on historical payment patterns, a one-time catch-up increase creates a discontinuity in the development triangle that standard link ratios will not capture.
Consider New York: if a self-insured employer has been paying E&M claims at rates frozen since before 2020, historical paid development factors reflect that frozen cost environment. Once the new schedule takes effect, every open claim and every new claim will generate higher medical payments. The chain ladder will read this as an acceleration in development when it is actually a structural reset. Case reserves set under the old schedule will be inadequate, and bulk adjustments will follow.
The severity of the catch-up depends on the duration of the freeze. New York’s six-year gap means the adjustment is larger than in states that update annually (where 2% to 4% increases compound gradually). WCRI’s hospital outpatient payment index already documents a tenfold variation in WC surgery payments across states, driven largely by fee schedule structure. States that lag for years and then reset create the widest swings.
In Missouri, the dynamic is different but equally disruptive. Without a formal fee schedule, medical severity has been governed by provider-by-provider “fair and reasonable” determinations. SB 1052 would replace this with a defined maximum, effective August 28, 2026 if enacted. If that maximum is set near prevailing commercial or Medicare-plus rates, it could exceed what some payers have been negotiating; if set below, it could trigger provider network contraction. Either outcome changes the medical severity assumption.
Where this shows up in your reserves
Open your most recent actuarial report and find the medical severity trend selection. If that trend was derived from paid data in a state with a frozen or absent fee schedule, it reflects a cost environment that is about to change. The signal will appear first in the paid-to-incurred ratio for open medical claims (the ratio spikes as new payments flow at higher rates), then in the calendar year paid development column for recent accident years. For workers’ comp IBNR estimates built on paid development triangles, the distortion is acute: the chain ladder treats the fee schedule catch-up as acceleration in development rather than a level shift, overstating projected ultimates for older years while still understating the new baseline for current ones.
Decision-maker checklist
- Confirm your medical severity trend source. Ask your actuary whether the medical trend assumption reflects the current fee schedule or the pending one. If the answer is “current,” request a sensitivity run at the expected post-reform rate level.
- Isolate fee-schedule-sensitive claims. Request that your TPA flag open medical claims by state and by CPT code category (E&M, hospital outpatient, physical therapy) so you can estimate the dollar impact of a reimbursement increase on open inventory.
- Review Missouri claims separately. If you are self-insured in Missouri, ask how medical severity has been benchmarked absent a formal fee schedule. The transition to a defined maximum will change both the level and the variability of medical payments.
- Stress-test the development triangle. Ask your actuary to run an alternative scenario applying a 10% to 20% upward adjustment to medical paid development factors in the affected states, reflecting the catch-up rather than the historical trend.
- Watch for mid-triangle effective dates. Fee schedule changes that take effect mid-year create mixed-rate accident years. Confirm that your actuary’s data segmentation captures the before-and-after payment environment within the same policy period.
What this means for your next review
At your next reserve study or interim monitoring meeting, put one question on the agenda: are our medical severity assumptions in New York, Missouri, and Kentucky calibrated to the fee schedule we will be paying under, or the one we have been paying under? If the answer is the latter, the unpaid estimate is understated by the width of the catch-up. Request a sensitivity analysis before the new rates take effect so the adjustment shows up in your reserve as a planned recalibration, not as adverse development after the fact.
Sources
- NY WCB Proposed Fee Schedule Amendments (January 14, 2026)
- NY WCB Regulatory Impact Statement (PDF)
- Missouri SB 1052 Bill Text (LegiScan)
- Kentucky 2026 Hospital Cost-to-Charge Ratios
- Claims Journal: State Regulatory Surge Reshaping Workers’ Comp (May 27, 2026)
- MSSNY Pulse: WC Proposed Fee Schedule Coverage (January 16, 2026)