Health Reimbursement Arrangements (HRAs) are similar to Medical Savings Accounts in some respects.  HRAs are not taxed, must be used for substantiated medical expenses, are accompanied by a high-deductible insurance policy, and accumulate unspent money for future years.  The IRS guidance also says that employees can use HRA funds for health care after leaving an employer, but this is still evolving.  Some HRA plans create virtual accounts in which payments for health care are controlled by an employee, but the money actually stays with the employer.  In these situations, unspent account money may stay with the employer if the employee leaves.

The key difference between an HRA and a MSA is that an HRA can be offered by employers with more than 50 employees, but an MSA can not.  This greatly expands the market potential for HRAs.  Other differences between HRAs and MSAs are that HRAs are less defined, more flexible, and only funded by employers.

Many innovative companies offering Consumer Directed Health Plans today are basing their products on the HRA authorization, but create their own brand name for their account instead of calling it a Health Reimbursement Arrangement.  Alternative generic names for HRA-type accounts include: Personal Health Account; Personal Medical Account; Medical Spending Account; Health Spending Account; and Health Savings Account.  However, if current legislation is passed then the term Health Savings Account (HSA) will have a new meaning defined by federal legislation.

HRAs can act like virtual MSAs -- circumventing the current restrictions on MSAs for large employers. If the Medicare reform bill that is currently being deliberated by Congress as of July, 2003 passes, then Medical Savings Accounts (MSAs) and Health Reimbursement Arrangements (HRAs) may be replaced by Health Savings Accounts (HSAs) and Health Savings Security Accounts (HSSAs).  HSAs and HSSAs would have fewer restrictions than MSAs and HRAs.  If this happens, then HSAs and HSSAs may dominate HRAs and HRAs may turn out to have been an interim phenomenon.