Pennsylvania employers just got hit with a 14% spike in workers’ compensation medical costs. After years of steady declines, 2023 reversed the trend—and the reason isn’t what most business owners expect.
The Workers’ Compensation Research Institute (WCRI) released data showing medical payments per claim jumped 14% in Pennsylvania during 2023. The culprit? A little-known regulatory mechanism tying medical fee schedules to the state’s average weekly wage.
If you employ workers in Pennsylvania, this affects your 2026 insurance premiums. Here’s what changed and what you need to do.
Why Pennsylvania Workers’ Comp Medical Payments Jumped 14% in 2023
Pennsylvania’s workers’ compensation system uses a wage-indexed fee schedule. Medical providers treating injured workers get paid based on a formula tied to the statewide average weekly wage (SAWW).
When wages rise, medical reimbursement rates automatically increase. Simple mechanism, big consequences.
In 2023, Pennsylvania’s SAWW jumped significantly. The fee schedule followed. Medical payments per claim rose 14%—the sharpest year-over-year increase in recent history.
WCRI analyzed claims data from 2018 through March 2024, comparing Pennsylvania with 17 other states. The findings are clear: Pennsylvania’s wage-indexed system creates predictable cost growth when wages rise quickly.
What Wage-Indexed Fee Schedules Mean for Your Business
Most employers don’t realize their workers’ comp costs are directly tied to wage growth. Here’s how it works in practice:
- Automatic rate increases: When Pennsylvania workers earn more, doctors treating workplace injuries get paid more—regardless of whether injury severity or treatment complexity changed.
- No cost containment backstop. Unlike fixed fee schedules, wage-indexed systems lack built-in protection against rapid inflation during economic growth periods.
- Compounding effects over time: A single year of 14% growth creates a new baseline for future increases. This isn’t a one-time blip.
The Pennsylvania Department of Labor and Industry sets these rates annually. Employers have limited ability to negotiate or control medical costs within the system.
How This Compares to Other States (and What It Reveals)
Pennsylvania’s 14% jump stands out sharply when compared to the 17 states WCRI benchmarked. Most states saw modest increases or continued gradual declines in medical payments per claim during 2023.
| Cost Factor | Pennsylvania 2023 | National Trend |
|---|---|---|
| Medical Payment Change | +14% | +2% to +5% (typical) |
| Fee Schedule Type | Wage-indexed (SAWW) | Fixed or CPI-indexed |
| Prior Trend (2018-2022) | Declining costs | Mixed/stable |
States using Consumer Price Index (CPI) adjustments or fixed fee schedules experienced far smaller increases. Pennsylvania’s wage-indexing approach magnifies cost swings during periods of rapid wage growth.
This matters because wage growth in Pennsylvania accelerated significantly in 2023 as employers competed for workers post-pandemic. The statewide average weekly wage rose faster than in prior years—and the fee schedule automatically followed.
Premium Impact: What Pennsylvania Employers Should Expect in 2026
Workers’ compensation insurers set premiums based on historical claim costs. A 14% spike in medical payments doesn’t stay buried in actuarial tables—it flows directly into your renewal quotes.
Here’s what to anticipate:
- Premium increases of 8-12% for most Pennsylvania employers during 2026 renewals, assuming loss experience remains stable.
- Higher increases for high-claim industries: Manufacturing, construction, and healthcare employers face steeper hikes due to injury frequency and medical intensity.
- Experience modification factors matter more. Employers with strong safety records can partially offset rate increases, but the baseline cost floor just rose significantly.
Insurers have already begun incorporating 2023 claims data into their 2026 pricing models. If you haven’t received your renewal yet, expect the increase when it arrives.
3 Steps Pennsylvania Employers Can Take Now
You can’t change Pennsylvania’s fee schedule structure, but you can manage your claim costs more aggressively:
- Audit your claims management process. Faster return-to-work programs reduce medical duration. Every week an injured worker stays out increases total medical costs under the new higher fee schedule.
- Review your carrier’s provider network. Some insurers negotiate better rates with preferred providers even within the state fee schedule framework. Ask your broker about network performance data.
- Invest in workplace safety now. Preventing claims entirely becomes more valuable when each claim costs 14% more to resolve. Safety investments generate better ROI in 2026 than they did in 2022.
Pennsylvania employers should also monitor legislative discussions around fee schedule reform. Industry groups are pushing for modifications to the SAWW indexing formula to moderate future cost swings.
Why This Trend Could Continue Through 2026
Pennsylvania’s wage growth hasn’t slowed dramatically. Labor markets remain tight in key industries. The statewide average weekly wage will likely rise again in 2024 and 2025—meaning another automatic fee schedule increase is coming.
WCRI’s data shows this pattern clearly: wage-indexed systems create cost volatility tied to economic cycles rather than medical necessity or injury trends.
Employers should plan for continued upward pressure on workers’ compensation costs as long as Pennsylvania maintains its current fee schedule structure. The 14% jump in 2023 represents a new baseline, not a temporary spike.
Frequently Asked Questions
Why did Pennsylvania workers’ compensation medical payments increase so much in 2023?
Pennsylvania ties its medical fee schedule to the statewide average weekly wage (SAWW). When wages jumped significantly in 2023, medical reimbursement rates automatically increased 14%. This wage-indexed system creates direct linkage between labor market conditions and workers’ comp medical costs.
How does Pennsylvania’s system compare to other states?
Most states use fixed fee schedules or Consumer Price Index (CPI) adjustments, which create more predictable cost growth. Pennsylvania’s wage-indexed approach led to a 14% increase in 2023, while most other states saw increases of just 2-5% during the same period. The WCRI study compared Pennsylvania with 17 other states.
Will my Pennsylvania workers’ comp premiums increase in 2026?
Very likely. Insurers base premiums on historical claim costs. With medical payments per claim up 14% in 2023, most Pennsylvania employers should expect premium increases of 8-12% during 2026 renewals. High-claim industries like construction and manufacturing may see larger increases.
Can Pennsylvania employers do anything to reduce these costs?
Yes. Focus on claim prevention through stronger safety programs, faster return-to-work initiatives to reduce medical duration, and working with insurers that have better provider network rates. You can’t change the fee schedule, but you can reduce claim frequency and duration.
What is the statewide average weekly wage (SAWW) and why does it matter?
The SAWW measures average worker earnings across Pennsylvania. The state’s Department of Labor and Industry uses this figure to adjust workers’ compensation medical fee schedules annually. When Pennsylvania workers earn more, medical providers treating workplace injuries automatically get paid more—creating the 14% increase seen in 2023.
Bottom Line: Plan for Higher Workers’ Comp Costs in 2026
Pennsylvania’s 14% jump in workers’ compensation medical payments reversed years of declining costs. The wage-indexed fee schedule system means this increase becomes the new baseline for future growth.
Employers should review their safety programs now, audit claims management processes, and work with brokers to find carriers with strong cost containment strategies. The 2026 renewal cycle will reflect these higher medical costs—preparation today reduces premium shock tomorrow.
For Pennsylvania businesses, workers’ comp just got more expensive. The only question is whether you’ll manage it proactively or react when renewal notices arrive.