IN THE SUPREME COURT OF THE STATE OF KANSAS
No. 89,075
BLUE CROSS AND BLUE SHIELD OF KANSAS, INC.,
Appellee/Cross-Appellant,
v.
SANDY PRAEGER in her official capacity
as Commissioner of Insurance for the State of Kansas,
Appellant/Cross-Appellee,
and
ANTHEM INSURANCE COMPANIES, INC.,
Appellee/Cross-Appellant,
v.
SANDY PRAEGER in her official capacity
as Commissioner of Insurance for the State of Kansas,
Appellant/Cross-Appellee.
SYLLABUS BY THE COURT
1. The statutory standard of review under the Kansas Act for Judicial Review and Civil Enforcement of Actions, K.S.A. 77-621(c) and K.S.A. 77-623, is discussed and applied.
2. The rules governing review of an agency's interpretation of law and the parameters of judicial deference afforded to such interpretation are set forth and applied.
3. The Kansas Commissioner of Insurance is vested by statute with the general supervision, control, and regulation of insurers and has the power to make all reasonable rules and regulations necessary to enforce the laws of the state relating to these matters. This includes the making of reasonable decisions and interpretations in order to carry out the statutory provisions.
4. While the Insurance Commissioner cannot get involved in specific management decisions of either the acquiring or target company's respective boards of directors, the Commissioner has the authority pursuant to the Kansas Insurance Holding Companies Act to deny an acquisition based upon stated or intended management decisions when such decisions are not in the interests of the public, policyholders, or the insurance-buying public. Protection of the public is a longstanding and important function of the Commissioner.
5. Merely meeting statutory minimum surplus requirements or premium rate requirements for an existing domestic insurance company does not, in the context of an acquisition by a foreign company, automatically equate to operating in the interests of the public, policyholders, or the insurance-buying public. These statutory requirements do not override the Insurance Commissioner's supervisory charge under K.S.A. 40-3304 (d)(1) of the Kansas Insurance Holding Companies Act to disapprove a merger or other acquisition of control when these interests will not be served.
6. As an expert in the regulation of the insurance industry, the Insurance Commissioner is charged with making reasonable decisions and interpretations in order to carry out the statutory provisions. In this case, the Commissioner's interpretation of the acquisition statute (Kansas Insurance Holding Companies Act) has a rational basis to which we give great deference and approve.
7. Approval of a conversion from a mutual insurance company to a stock insurance company under K.S.A. 40-4001 et seq. requires an express finding, among others, that the continued operations of the new stock insurer would not be hazardous to existing or future policyholders or the public.
8. Under the facts of this case, the Insurance Commissioner did not act beyond the jurisdiction conferred by the Kansas Insurance Holding Companies Act.
9. Given the documentary and testimonial evidence admitted at the hearing and considered by the Insurance Commissioner, the findings of fact set forth in the order regarding post acquisition surplus reductions and premium rate increases are supported by substantial competent evidence.
10. Under the facts of this case, the Insurance Commissioner's findings regarding the likelihood of harm resulting from anticipated post acquisition surplus reductions and premium rate increases were not speculative and thereby did not render her act of disapproving the change of control transaction arbitrary and capricious.
11. The Kansas Insurance Holding Companies Act, read in its entirety, contains sufficient guidance from the legislature to enable the Insurance Commissioner to exercise her discretion in determining whether a proposed acquisition is unfair and unreasonable to policyholders of the insurer and not in the public interest, or likely to be hazardous or prejudicial to the insurance-buying public. Therefore, the Act does not violate Art. 2, § 1 of the Kansas Constitution which embodies the nondelegation doctrine.
Appeal from Shawnee district court; TERRY L. BULLOCK, judge. Opinion filed August 6, 2003. Reversed.
Dan Biles, of Gates, Biles, Shields & Ryan, P.A., of Overland Park, Kansas, argued the cause, and Brent Getty, of Kansas Insurance Department, was on the briefs for appellant/cross-appellee, Commissioner of Insurance for the State of Kansas.
Gary D. McCallister, of Gary D. McCallister & Associates, Ltd., of Chicago, Illinois, argued the cause, and Eric I. Unrein, of Davis, Unrein, McCallister, Biggs & Head, L.L.P., of Topeka, William H. Pitsenberger, general counsel, of Blue Cross and Blue Shield of Kansas, Inc., of Topeka, Sidney A. Shapiro, of Lawrence, and James C. Scoville, and Carl Micarelli, of Debevoise & Plimpton, of New York, New York, were with him on the briefs for appellee/cross-appellant Blue Cross and Blue Shield of Kansas, Inc.
Kevin M. Fowler, of Frieden, Haynes & Forbes, argued the cause, and Randall J. Forbes and John C. Frieden, of the same firm, were with him on the briefs for appellee/cross-appellant Anthem Insurance Companies, Inc.
Ross S. Myers, of Kansas City, Missouri, was on the brief for amicus curiae National Association of Insurance Commissioners.
Dawn Touzin, of Boston, Massachusetts, was on the brief for amicus curiae Community Catalyst, Inc.
Douglas Laird, and William W. Sneed, of Polsinelli, Shalton, & Welte, P.C., of Topeka, were on the brief for amicus curiae Kansas Medical Society.
Charles R. Hay and Steve A. Schwarm, of Goodell, Stratton, Edmonds & Palmer, L.L.P., of Topeka, were on the brief for amicus curiae Kansas Hospital Association.
Per Curiam: These appeals arise out of proceedings wherein Kathleen Sebelius, Kansas Commissioner of Insurance, denied the request by Anthem Insurance Companies, Inc. (Anthem), to acquire health insurance company Blue Cross and Blue Shield of Kansas, Inc. (BCBSKS). Anthem and BCBSKS then filed petitions for judicial review with the Shawnee County District Court based on five different reasons under K.S.A. 77-621 of the Kansas Act for Judicial Review and Civil Enforcement of Agency Actions (KJRA). The district court reversed the Commissioner's decision on the single issue of an erroneous application or interpretation of the law and declined to rule on the remaining issues presented. The Commissioner appealed, the other parties cross-appealed, and the case was transferred to us from the Court of Appeals on the Commissioner's motion. Our jurisdiction is pursuant to K.S.A. 20-3017.
For the reasons set forth in the opinion, we disagree with the district court's narrowly based decision and reverse. Under our obligation to make the same review of the administrative agency's actions as does the district court, and pursuant to our review under K.S.A. 77-621, we will address the questions asked of the district court which it left unanswered. Those KJRA issues, and this court's accompanying holdings, are as follows:
1. Did the Commissioner erroneously interpret and apply K.S.A. 40-3304 of the Kansas Insurance Holding Companies Act ("the acquisition statute")? No.
2. Did the Commissioner act beyond the jurisdiction conferred by the acquisition statute? No.
3. Is the Commissioner's order unreasonable, arbitrary, or capricious? No.
4. Is the Commissioner's order based on a determination of fact that is not supported by substantial evidence when viewed in light of the record as a whole? No.
5. Are K.S.A. 40-3304(d)(1)(C) and (E) unconstitutional delegations of a legislative function under Art. 2, § 1 of the Kansas Constitution? No.
See K.S.A. 77-621(c)(1), (2), (4), (7), and (8).
Consequently, the judgment of the district court is reversed, and the Commissioner's order is affirmed. The cross-appeals of Anthem and BCBSKS, based upon an alleged erroneous remand to the Commissioner by the district court, are rendered moot.
FACTS
The Companies' Backgrounds
BCBSKS evolved from two nonprofit service corporations, Blue Cross of Kansas and Blue Shield of Kansas, which were formed in the 1940's. Consolidation of the two companies in 1983 created BCBSKS. In 1992, BCBSKS terminated its nonprofit status and became a mutual insurance company. In order to extinguish its charitable obligations, BCBSKS made a one-time special payment of approximately $75 million for charitable purposes which was judicially approved.
Today BCBSKS is the largest health insurer in Kansas, with a 67% market share in the areas in which it operates. BCBSKS provides or administers private health care coverage for more than 715,000 Kansas residents in all Kansas counties except Johnson and Wyandotte. In addition, BCBSKS administers Medicare and Medicaid health care coverage for another 640,000 Kansans.
In 2000, BCBSKS had premiums of $873 million, surplus of $328.5 million, net income of $5.8 million, and assets of $730.8 million. For the 6 months ended June 30, 2001, BCBSKS had premiums of $484.1 million, surplus of $310.4 million, net loss of $14.4 million, and assets of $698.1 million.
Anthem developed from a mutual insurance company known as Blue Cross of Indiana. In 1985, Blue Cross of Indiana merged with the mutual insurance company known as Blue Shield of Indiana to create a company called Associated Insurance Companies, Inc. (Associated).
Associated began a series of mergers and acquisitions in 1993 with the merger of Blue Cross and Blue Shield of Kentucky into Associated. In 1995, Community Mutual Blue Cross and Blue Shield of Ohio was merged into Associated. In 1996, Associated changed its name to Anthem Insurance Companies, Inc. In 1997, Blue Cross and Blue Shield of Connecticut, Inc., was merged into Anthem. In 1999, Anthem purchased Blue Cross and Blue Shield of New Hampshire and Blue Cross and Blue Shield of Colorado and Nevada. In 2000, Anthem purchased Blue Cross and Blue Shield of Maine.
In 2001, Anthem converted from a mutual insurance company to a stock insurance company. Anthem became a wholly owned subsidiary of Anthem, Inc., which was created as a public holding company for the Anthem companies.
In 2000, Anthem had revenues of $8.7 billion, surplus of more than $1.9 billion, net income of $226 million, and assets of $5.7 billion. For the 6 months ended June 30, 2001, Anthem had revenues of $5.1 billion, surplus of more than $2 billion, net income of $143 million, and assets of $5.8 billion.
Sponsored Demutualization
In May 2001, BCBSKS and Anthem entered into an Alliance Agreement (Agreement) under which Anthem or its designated affiliate would acquire ownership and control of BCBSKS. The Agreement contemplates a two-step transaction, which the parties refer to as a sponsored demutualization. The first step is BCBSKS's conversion from a mutual insurance company owned by its policyholders to a stock insurance company. The second is Anthem's purchase of all shares of common stock authorized and issued by BCBSKS after its conversion. Under the Agreement, Anthem is to pay $190 million for BCBSKS's stock.
The Board of Directors of BCBSKS adopted a formal plan of conversion and submitted it to the Commissioner for approval in October 2001. Anthem filed a "Form A - Statement Regarding the Acquisition of Control of or Merger with a Domestic Insurer" with the Commissioner, seeking approval of its acquisition of BCBSKS.
The applications state that BCBSKS would convert to a stock company upon the approval of the Commissioner and BCBSKS policyholders eligible to vote, as determined under the Plan (Eligible Policyholders). Conversion would extinguish all policyholders' membership interests. Eligible Policyholders would receive a special cash distribution from BCBSKS limited to the amount by which BCBSKS's book value upon conversion exceeds $155 million. This specific amount was later calculated as $131 million.
In addition to the $131 million, Eligible Policyholders also would receive $142 million of the $190 million purchase price paid by Anthem. The remaining $48 million of the purchase price would be deposited into an escrow fund pending resolution of the Contingent Litigation Matter. Any money left in the escrow fund after that resolution and satisfaction of certain related liabilities would be distributed to Eligible Policyholders. This proposal eventually was approved by the required percentage of Eligible Policyholders.
BCBSKS engaged Dresdner Kleinwort Wasserstein, Inc. (DKW), an investment firm, to evaluate whether the total consideration to be distributed to Eligible Policyholders under the Agreement was equitable. DKW concluded that, from a financial point of view, the aggregate of the purchase price and the special distribution to be paid to Eligible Policyholders was fair. BCBSKS also engaged the actuarial firm of Milliman, USA, to devise an equitable method of allocating consideration to Eligible Policyholders.
The Commissioner considered the applications as a single transaction and consolidated them for further proceedings. To assist in her review, she formed a Kansas Insurance Department Testimonial Team (KID testimonial team) which consisted of independent special counsel and advisors as well as members of her staff. The Commissioner also held public comment meetings in five locations throughout the state. The examination process covered a period of several months, involving attorneys, investment bankers, actuaries, tax specialists, certified public accountants, and health care and planned development specialists.
The Commissioner presided over a public evidentiary hearing in Topeka from January 7-9, 2002. On February 11, 2002, she issued a 45-page final order containing 66 findings of fact and 8 conclusions of law which addressed all issues of conversion and acquisition. Her decision was governed by the conversion statutes, K.S.A 40-4001 et seq., and the Kansas Insurance Holding Companies Act, K.S.A. 40-3301 et seq.
The Commissioner's Findings and Order
Among other things, the Commissioner found that the proposal for consideration and allocation was fair to Eligible Policyholders. She also found that the sponsored demutualization would not result in any compensation, stock, or other benefit to any person associated with BCBSKS, and that BCBSKS executive officer compensation would not change as a result of the sponsored demutualization. She further found that BCBSKS has been able to recruit and retain sufficient competent staff and management. She also found that Anthem intends to offer employment to all persons employed by BCBSKS upon its acquisition of BCBSKS, but the employment will not necessarily be in Kansas. According to the Commissioner, however, the sponsored demutualization would not produce significant economies of scale. Nor would it lessen BCBSKS's exposure to local events. The combined Anthem companies would be subject to local events in nine states rather than only in Kansas.
The Commissioner further found that BCBSKS had accumulated a considerable surplus, which had allowed it to operate without maximizing its underwriting margins and thereby to hold down premium rates. She also found that BCBSKS intended to reduce the $286 million surplus to $155 million. She additionally found that not only would Anthem fail to restore the $131 million reduction, but it would also further reduce the surplus dedicated to Kansas policyholders to approximately $90 to $112.5 million because it capitalizes its subsidiaries at substantially lower levels than those maintained by BCBSKS. From this, the Commissioner found that after the sponsored demutualization, BCBSKS policyholders would be protected by a surplus less than half the current amount, so that BCBSKS would be considerably financially weakened by the sponsored demutalization.
The Commissioner also reviewed a report from PricewaterhouseCoopers LLP (PwC), which had been retained by the KID testimonial team to conduct a market impact analysis of the sponsored demutualization to determine likely changes that would occur in the health insurance market in Kansas if the transaction were approved. Toward that end, PwC specifically analyzed choices, availability and cost of insurance coverage, provider contracting arrangements, administrative processes, employment levels in Kansas, and factors likely affecting Anthem's general performance. For its study, PwC requested information from Anthem and BCBSKS, obtained information from the Departments of Insurance in other states in which Anthem operates, interviewed individuals who represent medical associations and hospital associations in states in which Anthem operates, and reviewed public documents. PwC concluded that with relation to choice, availability and cost of insurance, the levels of insurance that are available today would likely continue, but that there would be premium rate increases significantly higher with the sponsored demutualization than without it. The Commissioner found that PwC "performed the only systematic, analytic review of the Kansas health insurance market" and therefore gave its report substantial weight.
Primarily based upon the PwC report, the Commissioner also found the following, which are primarily compiled from her findings of fact:
54. Due to rising medical costs, health insurance rates will increase whether or not the sponsored demutualization is approved. This increase is referred to as "trend" in the market.
56-59. Over the last 6 years, while operating as a mutual company, BCBSKS had negative underwriting margins of 2 to 3%. While it had projected it would achieve positive underwriting margins of 0.4% by 2005, its best projection now due to a worse than expected underwriting performance during 2001 is that it will achieve 0% underwriting margin by 2005.
60-61. As a mutual insurance company, before converting to a stock company in 2001, Anthem achieved positive underwriting margins of 2 to 3%. However, Anthem's primary corporate objective is to match or exceed its top competitor across several criteria, including underwriting margins, and its investor-owned competitors have underwriting margins of 4.5 to 5%.
63-65. As a result of the sponsored demutualization, premium rates will not only increase above "trend," but also will be greater than those increases that would occur under BCBSKS's current management. Premium rate increases would not be uniform across categories of insureds. The premium rates will not increase above trend for large group businesses because it is experience-rated and more competitive than small group and individual markets. Similarly, rates are unlikely to increase, above trend, in the Medicare block of business, because it is already profitable and more competitive than the small group and individual markets.
66. As a result, the premium rate increases will be concentrated in the small group and individual markets, on which BCBSKS is currently losing money. These rates will occur as follows:
To achieve an increase in underwriting margins from BCBSKS's past 6-year negative 2% to a positive 2.5% (a conservative estimate of Anthem corporate performance) by 2005, Anthem would increase premium rates by 14% above trend.
And to achieve those underwriting margins of 2.5% by 2005, Anthem's premium rates would be 7% higher than those required to achieve BCBSKS's 0% underwriting projection by 2005.
Accordingly, BCBSKS premium rates will increase by at least 6% to 7% above the levels that would be expected without the sponsored demutualization.
Although PwC did not analyze the scenario where Anthem would achieve its purported goal of greater underwriting margins (4.5 to 5%) by 2005, the Commissioner found that under those circumstances the premium increases would be significantly higher than the 14% above trend increases which were based upon a 2.5% underwriting goal by 2005.
Although the commissioner found that premiums were only one of five factors which affect, e.g., increase, underwriting margins, she further found that there was insufficient/unpersuasive evidence presented to her to demonstrate strategies that would utilize these other factors to achieve such an increase in the future. Accordingly, she found that this lack of evidence necessarily pointed the analysis toward premium rate increases. These other four factors, and her discussion, follow:
(a) Medical expenses. Reducing medical expenses requires more aggressive contracting with providers than has been BCBSKS's practice. The sponsored demutualization will not reduce BCBSKS's medical costs.
(b) Administrative expenses or overhead. BCBSKS has lower administrative costs than Anthem. BCBSKS's current administrative-expense ratio is approximately 9%. When calculated in a way similar to BCBSKS's calculation, Anthem's current administrative-expense ratio is approximately 11.5%. The administrative-expense ratio of the Anthem West Region is 13.7%, down from 26.8% in 1999. Anthem presented no substantial evidence on how material reductions in BCBSKS's administrative expenses could be achieved.
(c) Membership enrollment. Anthem presented no evidence on how it would materially increase membership in Kansas.
(d) Benefit design. BCBSKS's benefit design will not change as a result of the sponsored demutualization.
From the information presented, the Commissioner concluded that Anthem would severely deplete BCBSKS's surplus to benefit the Anthem holding company and would raise premium rates significantly more than BCBSKS would without the acquisition. This would weaken the financial standing of the state's dominant health insurer and place a substantial/significant financial burden on the BCBSKS's policyholders, the public, and the insurance-buying public. Citing K.S.A. 40-3304(d)(1)(C), she concluded as a matter of law that the proposed sponsored demutualization would cause a material change in management that would be unfair and unreasonable to policyholders and not in the public interest. For these same reasons, the Commissioner also concluded as a matter of law, citing K.S.A. 40-3304(d)(1)(E), that the proposed sponsored demutualization would likely be hazardous or prejudicial to the insurance-buying public. Based on the 66 findings of fact and 8 conclusions of law of the final order, the Commissioner disapproved the proposed sponsored demutualization.
The District Court
The district court reversed the Commissioner, having distilled the multiple issues presented to it into one, i.e., whether the Commissioner correctly interpreted and applied the law pursuant to K.S.A. 77-621(c)(4). No in-depth review of the record to determine if her findings were supported by substantial evidence was made since the court found such irrelevant to its determinations that her legal interpretations were incorrect. In the court's analysis, however, it did examine the issues of premium increases and surplus reductions as follows:
"1. Feared increases in premiums.
"The Commissioner concluded, based upon the 'projections' of her expert, that Anthem, being a for-profit company with a track record of profitability, would bring the two unprofitable BCBS lines of insurance (small groups and individuals) to profitability perhaps as early as 2005. The existing BCBS business plan calls for similar results, but with a goal date of 2007. The Commissioner also found that Anthem would achieve profitability in these two lines of insurance solely by raising premiums (although there are a variety of ways that could be accomplished, e.g., reduction of medical costs, closer attention to claims, new benefit designs, lower administrative costs, and membership growth). Thus, the Commissioner found that two classes of Kansas policyholders would pay higher premiums sooner (perhaps as much as 2 years) under Anthem. This she declared to be 'hazardous or prejudicial' and/or 'unfair and unreasonable' to Kansas insureds and grounds for denial under K.S.A. 40-3304(d)(1)(C) and (E).
"The difficulty with the Commissioner's position, even assuming the double and triple inferences are factually supported, is that the Kansas Supreme Court has previously held that 'one risk group should not be subsidized at the expense of others.' Blue Cross & Blue Shield v. Bell, 227 Kan. 426[, 607 P.2d 498] (1980). Thus, it is contrary to the law of Kansas for an insurance company to use the proceeds from one line of insurance to subsidize another, each line being required to 'stand alone.' When reduced to its simplest terms, the Commissioner has denied this acquisition in the first instance because she fears Anthem will bring the two unprofitable BCBS insurance lines to profitability (and thus within the law) sooner than BCBS itself would do. Obviously, the mere statement of such a proposition reveals its irrationality. To deny an acquisition so that two classes of BCBS insureds (small groups and individuals) can continue to reap unlawful benefits at the expense of other BCBS insureds (the elderly and infirm in Medicare plans) is a proposition so indefensible as a matter of law as to require no further refutation.
"2. Feared future surplus reductions.
"As with her first justification for denial of the subject acquisition, the Commissioner's second ground likewise runs flatly counter to established Kansas law. With respect to the BCBS surplus, the Commissioner found: (a) some will be distributed to policyholders under the acquisition agreement (with which she took no exception) and (b) based upon her expert's further 'projection,' an additional part of the surplus would likely be reduced by Anthem after the acquisition. In fact, the expert predicted that the further reduction would lower the BCBS surplus to the range of $90 to $112.5 million. This prediction of the expert was based on the 'projections' of what Anthem and other for profit companies 'usually do.'
"Once again, even if one assumes the double and triple inferences of the expert to be factually supported, the argument fails as a matter of law. In K.S.A. 40-2c01 et seq., the Legislature has prescribed the required minimum levels of surplus for insurance companies doing business in Kansas. Even if the Commissioner's worst fears are realized (i.e., if surplus levels are actually reduced to the lowest levels of the projected range), the surplus will still be above the level declared legally sufficient by our Legislature. Again, the Commissioner has denied this acquisition because she fears Anthem will comply with Kansas law. K.S.A. 40-401, K.S.A. 40-402, and K.S.A. 40-2c01.
"Although the Commissioner is granted power to supervise insurers and to enforce the Kansas Insurance Code (K.S.A. 40-103), she is not authorized to add or change established legal requirements or take regulatory action based upon anticipated premium rates or levels of surplus that would be either required by or consistent with the law under the aforementioned statutory guidelines and case precedents. See e.g., Mitchell v. Liberty Mut. Ins. Co., 271 Kan. 684[, 24 P.3d 711] (2001); Olathe Community Hospital v. Kansas Corporation Comm'n, 232 Kan. 161[, 652 P.2d 726] (1982); Kansans for Fair Taxation, Inc., v. Miller, 20 Kan. App. 2d 470[, 889 P.2d 154, rev. denied 257 Kan. 1092] (1995).
"Finally, if more be needed, it is important to observe that all insurance rate increases and all insurance company surplus distributions are required to be first approved by the Commissioner. (K.S.A. 40-2215 sets forth the public policy the Commissioner must enforce regarding insurance rates. K.S.A. 40-3306 governs dividends that may be distributed from insurance company surpluses.) Accordingly, before the future predicted 'hazardous or prejudicial' and/or 'unfair and unreasonable' rate hikes and surplus reductions could occur, each would first have to be approved and authorized by the Commissioner herself. The Court is unwilling to presume, as a matter of law, that this or any subsequent Commissioner would approve 'hazardous or prejudicial' and/or 'unfair and unreasonable' rates or dividend distributions. Thus, it is not possible for these 'projections' to ever be realized and it is therefore illogical, if not arbitrary and capricious, for the Commissioner to base her denial solely on these 'projections.'"
On June 7, 2002, the district court vacated the Commissioner's order disapproving the acquisition in its entirety and remanded to the Commissioner for further proceedings not inconsistent with its opinion.
The Commissioner's Appeal
The Commissioner appealed the district court decision, and this we first consider. Essentially, her appeal argues that she correctly interpreted and followed K.S.A. 40-3304(d)(1)(C) and (E) and that the district court's interpretation and decision is erroneous. On February 4, 2003, the Supreme Court granted appellant's motion to substitute parties on appeal to reflect that Sandy Praeger replaced Kathleen Sebelius in her official capacity as Commissioner of Insurance.
Anthem and BCBSKS cross-appealed from the district court opinion to remand the case to the Commissioner. But, as we have previously stated, based on the result we reach, we need not consider the cross-appeals.
With this background, we now analyze and decide the issues raised on appeal from the Commissioner's orders.
ANALYSIS
Our standard of review is statutorily defined by the KJRA. Reed v. Kansas Racing Comm'n, 253 Kan. 602, 609. 860 P.2d 684 (1993). A court shall grant relief only if it determines one or more of the following:
"(1) The agency action, or the statute or rule and regulation on which the agency action is based, is unconstitutional on its face or as applied;
"(2) the agency has acted beyond the jurisdiction conferred by any provision of law;
"(3) the agency has not decided an issue requiring resolution;
"(