The new D.C. workers compensation law set to go into effect July 26 will reduce the annual insurance premiums that businesses here must pay by nearly one-third, the Greater Washington Board of Trade announced yesterday.
The high cost of the city's current workers compensation system has been "a major deterrent" to business operations here, said Stephen D. Harlan, president of the Board of Trade, which waged a seven-year campaign to have the system overhauled.
"We hope this action will bring the District more in line with its neighbors in Northern Virginia and suburban Maryland . . . and help remove any disincentives for doing business in the city," Harlan said.
The new premiums will mean an annual saving of $38.7 million to firms in Washington, which now grants higher workers compensation benefits -- up to $496 weekly -- than any state except Alaska, business executives say.
The District of Columbia currently has the 13th highest average premium rate out of 45 states that allow private insurers to compete for workers compensation coverage, according to Steve Lattanzio, vice president of National Council on Compensation Insurance, a New York-based rating agency that represents insurance companies.
Under the new law, the city would fall to the 25th most expensive. The insurance council filed a rate-reduction rate yesterday with the D.C. Insurance Department.
In 1980, under intense lobbying from the business community and over strong objections from labor unions, the D.C. Council enacted a law to curtail the District's federally based workers compensation program.
Currently, according to the Board of Trade, a worker who is totally disabled on the job in the District of Columbia can collect a maximum weekly payment of two-thirds of his salary, up to $495 a week. Disability payments are tax-free.
The legislation approved in 1980 lowers that maximum payment to $396 a week, tightens definitions of eligibility, and limits cost-of-living adjustments to 5 percent a year.
After the measure was passed and signed by Barry, labor groups challenged the authority of the council to change the law. Their contention was upheld by a D.C. Superior Court judge. But that ruling was overturned last January by a three-judge panel of the D.C. Court of Appeals.
Jim Hansen, insurance administrator for the George Hyman Construction Co., said yesterday that his firm pays "hundreds of thousand of dollars annually." He said the high payments make it difficult to compete against firms in neighboring Maryland, where the highest weekly benefits are $248, and in Virginia, where the maximum is $231.
Joslyn Williams, president of Greater Washington Central Labor Council, said yesterday, "I do not think the reduction in rates will be the determining factor in whether businesses stay here. Absolutely no study can show that.
"I expect businessmen will take their extra money and put it in the bank and draw 14 percent profit on it," Williams said. "In the next round of collective bargaining, we are going to make sure that they share that money with employes."
Ron Richardson, executive secretary treasurer of Local 25 of the Hotel and Restaurant Employees Union which represents about 10,000 employes said, "They insurance companies should have given that 30 percent reduction a long time ago. They are the ones that have been cheating the business community all along, not the workers."
Workers compensation insurance pays benefits to employes injured while at work and to survivors of those killed on the job. The program, required by law, had skyrocketed from a cost of about $20 million paid in premiums in 1972 to $133 million last year.