What’s the difference between for-profit and not-for-profit health funds?

Did you know that in Australia there are both for-profit and not-for-profit health funds? It might be something else to consider when you are choosing which private health policy to take. While both types of funds have plenty of similarities, there are distinct differences that might influence your final decision. This is because they operate under distinct models that can alter your premiums, offer more (or fewer) benefits and even influence their level of customer service.

You’ve come to the right place to learn about all the key features of both for-profit and not-for-profit health funds. So whether you’re in search of affordability, transparency or a commitment to community goals, here’s what you need to know about both types of funds.

For-profit and not-for-profit health funds operate under separate models, each of which has its own implications for policyholders just like you.

For-profit funds are – as the name suggests – driven by profits. This essentially means they are designed to generate revenue for their shareholders. This can sometimes translate to higher premiums and a strategy around maximising profits rather than prioritising member benefits. On the other hand, not-for-profit funds are structured in a way that lets them reinvest any surplus money back into the fund to benefit their members. They can usually offer more competitive premiums and may even provide you with extra benefits or services.

Another key difference is their governance structure. For example, while for-profit funds are governed by a board of directors whose primary objective is to maximise shareholder returns, not-for-profit health insurance funds are run by a board of trustees or members who are working towards the best interests of their policyholders.

There are a few other differences that might help you decide which type of fund to pursue. Customer service and member satisfaction will be different depending on which of the two funds you go with. Not-for-profit funds will usually concern themselves with member satisfaction and might give you an all-round more personalised service and support offering. They are usually more transparent about their operations as well.

Ultimately, the choice between a for-profit versus not-for-profit health fund will depend entirely on what you want individually. While some Aussies will be drawn to cheaper premiums and competitive benefits, others might value the community focus and member-centric approach of not-for-profit funds.

Not really.

The cost of private health insurance depends on all sorts of things, from the level of cover you want, to the breadth of their provider network, to your own individual circumstances – rather than just whether the fund is for-profit or not-for-profit.

While for-profit funds are built to make the greatest profits and deliver returns to shareholders, not-for-profit funds are more about member benefits and reinvesting surpluses. In general, that means not-for-profit funds can usually offer more competitive premiums and value-added benefits, making them potentially less expensive for policyholders. However, this isn’t always the case, as pricing can also be influenced by market competition and regulatory requirements.

Jumping into a not-for-profit health fund comes with several advantages. Their policies are usually built in such a way that they are more about your wellbeing and happiness rather than the company’s profit margins. Here’s are a few reasons why people sign up for not-for-profit health funds:

• Member-focused: Not-for-profit health funds prioritise the needs of their members. This helps ensure all decisions are made with the best interests of policyholders – just like you – in mind.
• Competitive premiums: Not-for-profits can make themselves more attractive with competitive premiums, as they are all about providing affordable healthcare rather than maximising profits.
• Better member service: With a commitment to member satisfaction, not-for-profit health funds generally have superior customer service – so you always get a fast response and great support when needed.
• Community-focused: Not-for-profit health funds often have strong community ties, and they may even reinvest profits back into the fund for the purpose of improving their services and supporting community initiatives.
• Comprehensive cover: Many not-for-profit health funds in Australia have lots of policies to choose from. This includes comprehensive cover like Gold or ‘Plus’ policies, as well as general hospital, extras and combined policies. In other words, you can rest easy knowing they are catering to all your healthcare needs.
• Ethical practices: Search hard enough and you’ll find plenty of not-for-profit funds that operate with a strong ethical framework. They are transparent, fair and accountable in their operations – usually having a clear ESG model that governs their decision-making.
• No shareholder pressure: Unlike for-profit insurers, not-for-profit health funds aren’t driven by shareholder interests. This means they can instead prioritise their members’ needs without the pressure to generate profits.
• Member benefits: Many not-for-profit funds have additional member benefits attached to their policies, such as discounts on health services, wellness programs and access to exclusive healthcare providers.

While joining a not-for-profit health insurance fund comes with plenty of pros, there are also some cons you might want to consider before making a decision. Here are some potential drawbacks:

• Smaller network: Some not-for-profit health funds have a smaller network of providers compared to larger for-profit insurers. This might mean you have a more limited choice and access to healthcare services, especially if you live in a regional or remote community.
• Premiums and costs: While not-for-profit health funds do their best to offer competitive premiums, some policies may still be relatively expensive compared to for-profit health insurance policies – particularly if you are looking for the most comprehensive cover.
• Investment returns: Not-for-profit health funds might bring in lower investment returns compared to their for-profit counterparts, which could affect their ability to make their premiums more competitive.
• Financial constraints: Without the motivation to make profits and consistently expand, not-for-profit health funds could potentially face financial issues that limit their ability to invest in improving their services or offering new benefits to their members.

Absolutely not!

While not-for-profit funds do indeed focus more on their member benefits over generating profits, their cover is usually equal to – if not exceeding – policies created by for-profit health insurers. You’ll find they have a range of policies with varying levels of cover to suit your specific needs.

Ultimately, the extent of cover you get will depend on the specific policy you choose, including its various inclusions, exclusions, limits and premiums.

There are actually quite a few not-for-profit health funds in Australia. So if you’ve weighed up all the pros and cons and have decided you want to take out not-for-profit health insurance, here are some of the funds you’ll be able to choose from:

Unrestricted (open to everyone)

• HBF 
• Lukes Health 
• Queensland Country Health 
• Australian Unity 
• Mildura Health Fund 
• Westfund 
• Phoenix Health Fund 
• HIF 
• HCF 
• HCI 
• CBHS 
• RT Health 
• Latrobe Health Services 
• Hunter Health Insurance 
• Health Insurance Fund 
• Territory Health Fund 
• Peoplecare Health 
• Health Partners

Restricted (open to specific industry or group members)

• Teachers Health 
• Navy Health 
• TUH 
• Emergency Services Health
• Nurses and Midwives Health 
• Police Health 
• Defence Health 
• Reserve Bank Health Society Ltd 
• Uni Health 
• ACA Health 
• Doctors’ Health 
• CBHS Health Fund

There’s no ‘best pick’ among them, as the right policy should match your healthcare needs and – arguably most importantly – your budget. So make sure you take the time to compare private health insurance across both not-for-profit and for-profit health funds before making your decision.

At the end of the day, the choice between a for-profit policy and a not-for-profit health fund will depend entirely on your individual preferences – not to mention your budget and any existing healthcare needs. Whatever you end up going with, make sure you carefully evaluate all the pros and cons of each type of insurer to make the best health insurance decision for you.