Canstar compared and rated 21 different health insurance providers for our most recent health insurance Star Ratings; each offering a different range of products with different premiums.
However, an additional point of difference is what funds actually do with the premiums paid by their members. This is the difference between for-profit and not-for-profit funds.
Many funds are for-profit, meaning they aim to provide a return to their owners and/or shareholders using the premiums paid by members. Not-for-profit health funds are less common. Here’s some information about not-for-profit health funds in Australia and how they work.
What is a not-for-profit health fund?
A not-for-profit health fund is a health insurance provider that uses its revenue only to pay benefits to members and to cover operating costs. Not-for-profit health funds can either be open to anyone or only to individuals in a certain industry or association.
Many of Australia’s not-for-fund health profits are part of Members Own – an industry group of mutual and not-for-profit health funds which advocate for what they see as the benefits of not-for-profit health insurance. Members Own says that over 1 million Australians are with one of its funds.
What’s the difference between for-profit and not-for-profit health funds?
The main difference between not-for-profit and for-profit funds is simple – for-profit funds aim to make a profit from the premiums paid by their members, while not-for-profit funds don’t. This may manifest itself as differences in policy price points, features and services offered, as well as the percentage of premiums returned to members as benefits.
More specifically, for-profit funds will generally ensure their policy premiums are at a level where they can generate a profit (after benefit payments and operating costs have been taken into account); whereas not-for-profit funds typically only need enough revenue to cover costs.
Any surplus revenue generated by a not-for-profit fund will generally be reinvested with the aim of improving the quality of the services and products offered to the fund’s members.
Which Australian health funds are not-for-profit?
According to privatehealth.gov.au, the following health funds operate in Australia on a not-for-profit basis. Funds are noted as ‘restricted’ if membership is limited to certain groups or industries:
- ACA (restricted)
- CBHS Health Fund
- CDH
- Defence Health (restricted)
- Emergency Services Health (restricted)
- Frank Health Insurance
- GMHBA
- HBF
- HCF
- Health Care Insurance
- Health Partners
- HIF
- Latrobe
- Mildura Health Fund
- Navy Health (restricted)
- Nurses & Midwives Health (restricted)
- Peoplecare
- Phoenix Health
- Police Health (restricted)
- Reserve Bank Health Society (restricted)
- RT Health (restricted)
- St Lukes
- Teachers Health (restricted)
- TUH (restricted)
- UniHealth (restricted)
- Westfund
If you’re interested in taking a look at some of the policies offered by Australia’s not-for-profit health funds, you’ll see below a snapshot of policies from these providers. You can also use our health insurance comparison tool to generate a comparison of products from not-for-profit funds which may be better suited to your specific needs and circumstances.
The table below displays a snapshot of hospital & extras policies offered by not-for-profit funds on Canstar’s database, sorted by Star Rating. Before committing to any policy, check upfront with your insurer and read the PDS to confirm whether it meets your needs. Please note the results are based on a couple born in 1980 in NSW.
What are the benefits of being a member of a not-for-profit fund?
According to Members Own, when it comes to their member funds compared with a comparative group of for-profit health funds:
- Members Own funds returned 2.2% more in benefits as a percentage of premiums (86.8% vs. 84.6%)
- 10.5% of Members Own fund members made Level 3 complaints (disputes which require the intervention of both the health fund and the Private Health Insurance Ombudsman), compared to 63.2% of for-profit health fund customers
- Members Own funds had a 86.8% member retention rate, whereas for-profit funds had an 83.9% retention rate
Are there any possible drawbacks to being a member of a not-for-profit fund?
Because not-for-profit funds constitute a smaller proportion of the health insurance market than their for-profit counterparts, those wanting to go with a not-for-profit fund may end up with a narrower range of policies and products to choose from.
Additionally, not-for-profit health funds may not offer the same policy bonuses as some for-profit funds – free gym memberships, gift cards when you take out a policy etc. That being said, the ins and outs of every policy will differ, so you should check what any given policy offers you before deciding to take it out or not.
With that in mind, whenever you’re choosing a health insurance policy or considering a range of policies, it may prove beneficial to consider a range of factors – like the value it offers you and its suitability to your circumstances – and not just the fund’s business structure.
You can compare health insurance and choose a policy that suits your needs with Canstar.
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