In 1996, the U.S. created a test program for Medical Savings Accounts (MSAs), tax-free accounts that can be used to pay for routine medical expenses. So far, only about 100,000 accounts have been opened. Yet, MSAs are flourishing in South Africa, where they already cover 4.6 million residents, more than any other type of private insurance, and their popularity keeps growing.

• For much of the past decade, under the regime of Nelson Mandela, South Africa enjoyed what was perhaps the freest market for health insurance anywhere in the world.

• After South Africa deregulated its insurance industry in 1994, virtually every type of health plan sold in the U.S. was made available there; and after a favorable ruling from tax authorities, employers' contributions to MSAs received the same tax breaks as payment of third-party premiums.

• Thus, in South Africa, MSAs have competed against other forms of health coverage on a level playing field, and in just six years have captured more than half the market for private insurance, according to a study by the National Center for Policy Analysis in Dallas.

According to the NCPA study, younger families with MSAs cut their outpatient spending by 56 percent, while households headed by seniors enjoyed a 47 percent reduction. As for inpatient costs, younger families saved 81 percent and older families 73 percent.

MSAs have taken off in South Africa because they are more available, face fewer government restrictions, and can be tailor-made to suit individual needs. In the U.S., the Health Insurance Portability and Accountability Act of 1996 made MSAs available only to self-employed individuals or people who work for businesses with 50 or fewer employees.

Source: Laura B. Benko, "High interest rate; South Africa's experience with MSAs is worlds apart from America's," Modern Healthcare, November 13, 2000.

For NCPA study "MSAs in South Africa" http://www.ncpa.org/studies/s234/s234.html