A comment on Neudeck and Podczeck's "adverse selection and regulation in health insurance markets".

Using the Grossman equilibrium concept, Neudeck and Podczeck [Journal of Health Economics 15 (1996) 387] show that imposing a minimum standard on a perfectly competitive insurance market can result in anti-competitive effects: decreased welfare with some insurers earning positive profits. However, the Grossman concept precludes an insurer from offering two separating, cross-subsidizing health plans. When an insurer can offer multiple plans (as under both the Nash and Miyazaki-Wilson equilibrium concepts), I show that minimum standards result in a doubleton equilibrium, never allow positive total profits, and increase welfare. This is of interest since in 1997 more than half of establishments in the US offering choice of multiple plans did so through a single insurer.