Global Perspectives on Consumer Driven Healthcare: Lessons for Employers

As health care costs continue to rise and employers seek sustainable ways to finance benefits, global innovations in medical savings accounts offer useful lessons. In the U.S., the Health Savings Account (HSA) is well-known, but other countries like Canada, Singapore, and Kenya have taken different approaches shaped by local tax laws, social insurance structures, and cultural attitudes toward saving. By studying these global models, employers and benefits professionals can better understand how consumer-driven healthcare works worldwide.

The U.S. Model: Health Savings Accounts (HSAs)

 A Health Savings Account (HSA) is a model that helps individuals manage healthcare costs while receiving favorable tax treatment. A plan sponsor pairs a high-deductible health plan (HDHP) with a tax advantaged savings account owned by the member. Contributions are made pre-tax, balances grow tax-free, and withdrawals for qualified medical expenses are not taxed-a triple tax advantage. Additionally, employers may save on premiums by offering high-deductible plans and can use part of those savings to fund employee HSAs. This is all made possible through the U.S. tax code.

While tax incentives and consumerism drive adoption and utilization in the U.S., medical savings accounts are also used in different capacities around the world. Here are three countries that have integrated medical savings accounts into their health and well-being framework.

Canada: Health Spending Accounts (HSAs)

Canada also has an HSA, but here the acronym stands for Health Spending Accounts. These accounts operate differently from the U.S. model, as the name suggest they focus on providing dollars for employees to spend as opposed to save. Most accounts follow a "use it or lose it" model, conceptually like a Flexible Spending Account (FSA) in the United States. They are voluntary accounts and can work alongside Canada's public healthcare system to provide a flexible, tax-efficient way for employees to pay for health expenses.

The concept has been a part of Canada's tax law for decades, but the modern, flexible Health Spending Account structure gained significant traction in the late 1990s and early 2000s. It became particularly popular for small businesses seeking a tax-efficient way to pay for medical expenses. For the employer, these benefits are a 100% tax-deductible business expense, and for the employee, they are a non-taxable benefit.

There are no government-mandated contribution limits. Instead, the employer determines the annual allocation amount for each employee (e.g., CAD 1,000 per year). Unlike a Health Savings Account in the U.S., employees do not contribute their own pre-tax funds, and unused amounts do not "roll over" in the same way. Policies operate on a carry forward basis (typically one year) and are set by the employer and the plan administrator.

For an employee, the account supplements their statutory and supplemental medical benefits. When an employee incurs an eligible medical expense not covered by the provincial healthcare or other insurance plans, they are then eligible to have it covered as a tax-free benefit through the HSA. The range of eligible expenses is extensive and is defined by the Canada Revenue Agency, including dental, vision, prescription drugs, and paramedical services.

Singapore: Medisave

Unlike the voluntary systems in the U.S. and Canada, Singapore's medical savings accounts are a mandatory part of its social security framework, known as the Central Provident Fund (CPF).

The Medisave scheme launched in 1984, and was established to ensure that citizens and permanent residents have the resources to pay for future medical needs and to encourage personal responsibility for healthcare costs. Contributions are mandatory and automatically deducted from the employees and employers for Singapore Citizens and Permanent Residents.

Medisave funds are not contributed directly but are automatically allocated from mandatory monthly contributions to the CPF. A percentage of an employee's wage, which varies by age, is channeled into their Medisave account. For instance, an employee aged 35 and below contributes 20% of their wage to their CPF, with the employer adding another 17%. Of that total, 8% of the wage is specifically allocated to the Medisave account.

The Medisave account functions as a personal savings fund designated for healthcare expenses. Funds can be used to pay for the employees' own medical bills as well as those of immediate family members. Withdrawals are permitted for a wide range of government-approved expenses, including hospital bills, specific outpatient treatments like chemotherapy and dialysis, health screenings, and premiums to the national health insurance plan. To encourage prudent spending, the government sets specific withdrawal limits that vary by procedure and hospital ward type. There is also a cap on the maximum balance an account can hold, set at SGD 74,000 for 2025. Once this limit is reached, any subsequent Medisave contributions are redirected to the individual's other CPF accounts.

Kenya: Post-Retirement Medical Funds (PRMFs)