Non-profit health insurance in Australia: What you need to know

When selecting a health insurance provider, Australians weigh multiple factors, like whether an insurer is for-profit or not-for-profit. This distinction matters if you prioritise how your provider allocates its revenue (i.e. back to you in the form of greater rebates, or to shareholders). 

This guide offers an overview of not-for-profit health insurance providers in Australia, explaining what sets them apart from their for-profit counterparts.

What is a not-for-profit health fund?

A not-for-profit health fund is an insurance provider that reinvests all its revenue back into covering member benefits and operational expenses, such as staff wages, rent, and marketing. Unlike for-profit insurers, which distribute profits to shareholders, not-for-profits are structured to return a surplus directly to members and/or retain it in the form of reserves.

These funds fall into two categories:

1. Open funds: Accessible to the general public.

2. Restricted funds: Available only to specific industries or associations.

Who represents these funds?

The Members Health Fund Alliance represents many not-for-profit insurers, serving over five million Australian members nationwide. This alliance includes 25 health funds that are either not-for-profit, member-owned, or regionally and community-based.

Open health funds are open to the public.

Which health insurance is not for profit?

Below is a list of for-profit (FP) and non-profit health (NFP) insurance funds Australia. 

• O: Open Fund (available to the public)

• R: Restricted Fund (available only to specific groups)

Source: Private Health

According to the Federal Government, not-for-profit health insurers operate as mutual organisations, meaning premiums are used solely for the operation of the fund and to cover member benefits. Some of these funds are restricted, while others are open to the public.

Frequently Asked Questions

What’s the difference between for-profit vs. not-for-profit health funds:

The primary difference is in how they handle revenue:

• For-profit health funds aim to generate profits, distributing surplus income to shareholders after covering claims and operational expenses.

• Not-for-profit health funds only seek to cover costs, with any surplus typically reinvested to benefit members. This might involve reducing premiums, expanding coverage, or enhancing service offerings.

Some not-for-profit funds claim to offer better value by reinvesting surplus revenues into lower premiums or more comprehensive services, while maintaining a higher payout ratio of premiums to benefits.

Are not-for-profit health funds cheaper?

Not necessarily. The cost of your premium is influenced by several factors, such as the level of cover, your location, and the competitiveness of the fund. However, not-for-profit funds may offer better value overall through higher rebates and more comprehensive services, potentially reducing out-of-pocket expenses.

What is the largest not-for-profit health fund in Australia?

HCF is Australia's largest not-for-profit health fund.

Is HCF really not for profit?

HCF is Australia's largest nonprofit health fund with almost 1.9 million members.

What are the benefits of joining a not-for-profit health fund?

Members of not-for-profit funds may experience the following advantages:

• Higher return of premiums as benefits: On average, not-for-profit funds return more of their members’ premiums in the form of benefits.

• Higher customer satisfaction: These funds report satisfaction rates of 95% or higher, reflecting a stronger focus on member welfare.

What are the drawbacks of not-for-profit health funds?

• Limited provider networks: Since these funds represent a smaller portion of the market, your options for policies and healthcare providers may be more limited.

• Sustainability concerns: The Australian Prudential Regulation Authority (APRA) has expressed concern over the long-term viability of some not-for-profit funds, citing their restricted revenue streams and access to capital.

Conclusion: What matters most when choosing a health fund?

When choosing a health insurance provider, how your fund operates is important, but there’s more to getting good value health cover than that. Comparing different options and assessing what matters most to you will help ensure you select the best health insurance policy for you and your family.

Chris Stanley is the sales & operations manager of health insurance at Compare Club. With extensive experience and expertise, Chris is a trusted leader known for his deep understanding of health insurance markets, policies, and coverage options. As the sales & operations manager of health insurance, Chris leads a team of dedicated professionals committed to helping individuals and families make informed decisions about their health insurance needs.

Meet our health insurance expert, Chris Stanley

Chris's top health insurance tips

• 1

  Australia’s public health system is world-class, but wait times for public hospitals can be long, inconvenient - and leave you living in constant pain while you wait.

• 2

  An appropriate private health insurance policy can speed up your surgery, relieving your pain sooner.

• 3

  Family health cover means your children are covered under the same policy as you.

• 4

  Many health insurance policies come with a 12-month waiting period for pregnancy-related cover, so it’s a good idea to get a family policy organized well before starting your family. This means your child will be covered from birth until at least their early twenties (depending on which health fund you select).