With the economy picking up, the cost of workers' compensation insurance is expected to be a bigger issue in the coming year as companies begin to hire more workers.

Workers' compensation insurance rates increased an average 3.7 percent in 2012 to cover rising medical costs and an increased number of claims, according to Marianne Goodland, a spokeswoman at the state Division of Insurance, which regulates the insurance industry in Colorado.

Workers' compensation insurance rates previously were flat for about a decade as many companies across the state focused on safety and cost containment, Goodland said.

In 2012, some industries experienced higher percent increases than others, according to the Division of Insurance. Goods and services companies saw an average 4.8 percent increase in workers' compensation insurance rates, according to the division. Contractors in construction-related industries saw an average 4.5 percent increase. Manufacturing companies saw an average 1.9 percent increase; office and clerical companies saw a 1.2 percent increase.

To calculate rates for each profession, insurance brokers use a job-classification table with rates set by the state. Those rates — as well as rate increases — are approved by the Division of Insurance after annual hearings with groups such as the National Council on Compensation Insurance Inc., a private industry group, and consultants.

Since workers' compensation insurance rates for small businesses are calculated per $100 worth of payroll, the rate increases add up as payroll rises, said Tony Gagliardi, the state director of the National Federation of Independent Business, an industry trade group. That may keep companies from hiring new employees as quickly as they need to, Gagliardi said.

"It is an impediment," Gagliardi said. "When you raise the cost of employment on anything like workers' comp or unemployment taxes go up, companies are affected."