When comparing private health insurance providers, you might come across two types of health funds — not for profit and for profit. But, what exactly is the difference between the two? Which one might be best for you?
Below, we give a rundown of what a not for profit health insurance provider is, the pros and cons, and list all the nonprofit funds available in Australia.
What is a not for profit health insurance provider?
A not for profit (or nonprofit) health insurance provider is a mutual organisation where the profits are used to operate the business and benefit its members. Unlike a for profit health fund, a nonprofit health fund doesn’t run to make a profit for shareholders and/or owners.
Generally, the profits made by a not for profit health fund are used to cover benefits, reduce premiums, improve services, and provide more products for policyholders.
What is the difference between a for profit and nonprofit health fund?
In a nutshell, the difference between a for profit and not for profit health fund is their business structure.
A not for profit health fund is a member-based organisation where the premiums are used to pay for operating costs and to benefit members, instead of shareholders or investors. As a result, not for profit health insurance providers typically offer reduced premiums to their members.
On the other hand, a for profit health insurance provider such as NIB, Medibank, and Bupa, operates to make a profit. The surplus earnings from members’ premiums are then paid as dividends to its shareholders.
Regardless of which type of private health fund you choose, they both work the same in that members pay a premium for coverage. Ultimately, it’s what they do with their profits from the premiums that makes them different.
Not for profit health insurance providers in Australia
While there is a smaller pool of them compared to for profit health funds, not for profit health insurance providers are on the rise in Australia. According to the Australian Prudential Regulation Authority (APRA):
If you’re looking for a nonprofit health fund, you’ll find there are two types of funds – an open health fund and a restricted health fund. We give a quick summary of each below.
Open health funds
Open health funds are funds available for anyone in the public to become a member of. Unlike a restricted health fund, it does not require you to be part of an industry or group to be eligible for cover.
Below, we’ve put together a list of the open health funds available in Australia:
- Australian Unity
- Frank Health Insurance
- Health Care Insurance
- Health Partners
- Hunter Health
- Mildura Health Fund
- Phoenix Health Fund
- St Lukes
Restricted health funds
Restricted health funds are only available to members of a particular industry or group. For example, Police Health is generally only open to Australia’s police and emergency services members.
Below, we’ve put together a list of the restricted health funds available in Australia and their eligibility requirements:
- ACA Health Benefits Fund: open to current and past employees of Seventh-Day Adventist Church companies, Local Church Officers, and their families.
- CBHS Health Fund Limited: open to current and past employees of Commonwealth Bank Group, employees of CBA Group contractors and franchisees and their families.
- Defence Health Limited: for current and former ADF members and the Defence community.
- Doctors’ Health Fund: for medical and allied health professionals, their families and staff, medical and health care students, and AMA employees.
- Navy Health Ltd: open to the ADF community and employees of contractors to ADF.
- Nurses & Midwives Health: open to nurses and midwives.
- Police Health: open to Australia’s police and emergency services members.
- Railway and Transport Health Fund Limited: open to transport and energy employees.
- Reserve Bank Health Society Ltd: open to current and former Reserve Bank employees.
- Teachers Health: open to the education union members and their families.
- TUH Health Fund: open to current or former members and their families of a recognised union.
What are the pros and cons of not for profit health insurance providers?
To sum up what we’ve discussed so far, here are some of the pros and cons of not for profit health insurance providers:
So, which one do I choose?
Ultimately, there’s no one-size-fits-all answer as everyone’s needs are different. When it comes to choosing the right type of private health insurance, there are a range of factors to consider — a fund’s business structure is only just one of them.
As always, you should do your own research when working out if an insurance policy is right for you. If you want to learn more about health insurance, check out our other articles including tips on how to get the most out of your insurance, whether private health insurance is worth it, and plenty more.
NODDLE is a consolidated online resource, we are not financial advisors. We work with a range of industry professionals and compliance check our articles to ensure factual accuracy. However, we do not provide professional financial advice. Consider seeking independent legal, financial, taxation or other advice to check how the information and ideas presented in this article relate to your unique circumstances.