Not-for-profit health funds: What’s all the fuss?
A private health fund built for members, not investors - find out if the proof matches the pudding.
Key takeaways
- Not-for-profit-health funds don't have shareholders, so they use extra funds to save members money.
- Joining some funds is restricted to people working in certain industries and their families.
- Not-for-profit health providers aren't all that different on average for customers.
What is a not-for-profit health fund?
A non-for-profit health fund (Not-for-profit) are funds that are run for members, not shareholders. Theoretically this means all premiums paid into the fund are put towards improving services, reducing premiums, and paying operating costs.
Many not-for-profit health funds are 'open funds' that anyone can join. These include HCF, Frank Health Insurance, and Westfund. Some other's, like Teachers Health and Defence Health, restrict membership to people who work in certain companies or industries and their families.
Not-for-profit vs for-profit health funds
The main difference between the two types is how the funds aim to use the money they make.
- Different business structures. A not-for-profit is a mutual organisation owned by policyholders and members, while for-profits are corporations with owners and shareholders.
- Profits go to members, not the bottom-line. Not-for-profit funds are designed to allocate a larger ratio of revenue to their members in the form cheaper premiums, rebates and benefits - rather than dividends or shareholders.
- Policyholders are the priority. With all profits returned to the fund, members can often find better benefits and extra flexibility in their policy.
Are not-for-profit funds better?
There doesn't appear to be a huge material difference for customers.
According to the Ombudsman data, not-for-profit funds get fewer complaints and retain more of their members, but have slightly higher hospital charges and gap fees paid on average. For-profit health funds cover around 1% more extras on average.
However, depending on what not-for-profit or for-profit fund you're with, your mileage will always vary. Larger funds might have more bargaining power with providers and more financial assets to cover services. Plus, how well a fund is managed could play a bigger role in value for money than the business model.
It's always smart to shop around and compare different health insurers, because the differences can be significant.
Every not-for-profit health insurer in Australia
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