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What is not-for-profit health insurance?
A not-for-profit health fund is one that reinvests all of its revenue into the fund to benefit members, not shareholders. They use their revenue exclusively to cover operating costs, lower premiums and increase member benefits.
In comparison, for-profit funds use members’ premiums to earn a return for shareholders, on top of their operating costs.
What’s the difference between not-for-profit and for-profit?
Business structure
A not-for-profit fund is owned and operated by policyholders and members, whereas for-profit funds follow a more conventional business model with shareholders seeking for a return on their ownership. For-profit funds can be either privately owned or publicly-listed.
Members benefit from the profits
The revenue generated by not-for-profit funds are cycled back to members. The aim is to lower premiums, offer more inclusive coverage and other benefits, rather than returning excess revenue to shareholders.
Community and industry origins
Many not-for-profit funds started as specific community and industry orientated funds that have expanded to offer open access. By contrast, for-profit health insurance funds are usually larger organisations or subsidiaries of big companies that aren’t aligned with any particular groups.
Restricted versus open not-for-profit funds
Not-for-profit health insurance providers are either open or restricted funds. In Australia most not-for-profits are open funds where anyone may access it.
A restricted fund, on the other hand,offers membership with certain eligibility criteria. This can include being in a particular workplace, profession or industry.
Restricted non-for-profit health insurance funds are ACA, CBHS Health Fund, Defence Health, Navy Health, Nurses & Midwives Health, Police Health, Railway & Transport Health Fund, Reserve Bank Health Society, and Teachers Federation Health.
Is not-for-profit health insurance cheaper?
Not-for-profit funds aren’t always cheaper, as there are many factors that determine the cost of a health insurance policy. Across both not-for-profit and for-profit funds, premiums are primarily based on which level of cover and any extras you select. Health insurance premiums also vary between funds based on other factors, including the overall competitiveness of the fund and its agreements with local healthcare providers.
Not-for-profits are often better value for money, because they reinvest their revenue into improving their services. So even though the price could be the same as what you pay in a for-profit fund, there are likely more benefits in being with a not-for-profit, such as higher premium returns, paying out more in benefits and investing in better services.
To find the cheapest policy that best suits your needs, it’s a good idea to compare health insurance plans from a range of providers, both not-for-profit and for-profit to ensure the most suitable coverage.
Chris Whitelaw, General Manager - Health Insurance
“Ultimately, the main distinction between not-for-profit and for-profit funds is in what they do with the premiums, rather than their prices. When comparing health insurance policies, we find that customers usually consider the funds’ profit status as a tie-breaker if the premiums and level of cover are on par.”
Chris Whitelaw, General Manager - Health Insurance
Pros and cons of not-for-profit health insurance
Pros
- Typically they have higher premium returns which means that members’ money will go back to them through benefits paid on claims and improved services
- They are more often community based and members may get the opportunity to have a say in how the fund is run
- On average customers of not-for-profit funds tend to be more satisfied and stay with the fund longer
Cons
- For-profit funds tend to offer a wider selection of policies, with more variety and flexibility than some not-for-profit funds
- Some not-for-profit funds have smaller healthcare provider networks, potentially meaning fewer options to choose from and needing to change practitioners
- Some not-for-profit funds are restricted to certain groups which limits access
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