Not-for-Profit Health Insurance

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

What are the major not-for-profit health insurance companies in Australia?

Are not-for-profit health funds cheaper?

Do not-for-profit health funds offer more coverage?

Is a not-for-profit health insurer right for me?

Where can I find and compare health insurance?

Long story short

Not-for-profit health funds don’t give profits to owners or shareholders

Instead, they might use this money to boost their services.

Most health funds in Australia are not-for-profits

Some not-for-profits have restricted membership, which means you need to be eligible to become a member.

Not-for-profits don’t necessarily offer cheaper policies or more coverage

It can come down to the specific policy, along with what suits you and your family.

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

In a nutshell, health insurance is when people pay money (premiums) to health insurers in return for coverage. The health insurer then uses this money to pay members’ claims, as well as keep its business operating – from paying staff, marketing to new members, and even simply keeping the lights on! Once claims and business operation expenses are covered, any money left over is considered profit.  

A health fund is considered for-profit or not-for-profit depending on the way it decides to use its profit.  

Not-for-profit health insurers (sometimes called ‘mutual funds’) use it to help further their mission and support their members’ health. This could mean adding more services to their offerings or paying back more on claims. 

For-profit health funds send their profit on to their owners or shareholders. But they, too, might use them to bring more to the table for members. After all, a bigger membership base could mean bigger profits.  

What are the major not-for-profit health insurance companies in Australia?

Australia has a lot of health funds – 30, in fact! It can sometimes seem like more, though, since some insurers have multiple brands in the market (not to mention some have lots of ads flying about). Of these 30 health insurance companies, 22 are not-for-profits.

Just like in any industry, some health insurers have a bigger slice of the market pie than others. To keep things simple, here’s where things stand with the 10 health funds that had the greatest share of the market in 2023–24. We’ve also included whether they’re a restricted or open fund (restricted funds have membership eligibility requirements, while open funds are, well, open to all). 

Health insurer	Business structure	Membership	Market share
Australian Unity	For-profit	Open	2.2%
BUPA	For-profit	Open	25.4%
CBHS Health Fund	Not-for-profit	Restricted	1.4%
Defence Health	Not-for-profit	Restricted	2.0%
GMHBA	Not-for-profit	Open	2.2%
HBF	Not-for-profit	Open	8.1%
HCF	Not-for-profit	Open	12.6%
Medibank	For-profit	Open	26.7%
nib	For-profit	Open	9.7%
Teachers Health	Not-for-profit	Restricted	2.6%

Source: Commonwealth Ombudsman – State of the Health Funds Report 2023–24, p14

Are not-for-profit health funds cheaper?

Not-for-profit health funds might offer more competitive premiums, given they don’t need to factor paying profits to their owners or shareholders into their overall structure. However, it’s not a given that not-for-profits always have cheaper policies. For instance, a policy could be cheap but not cover all that much. 

That’s why it’s important to remember that a bargain’s worth is in its value for your money, rather than its ticket price. In the health insurance world, value for money can look like a closer balance between the money you pay in premiums and the money you claim back. This is talked about as benefits as a percentage of premiums.  

Looking at our 10 insurers with the biggest share of the market, the not-for-profits averaged 85.73% when it came to benefits as a percentage of premiums in 2023–24. However, the for-profits weren’t too far behind – they averaged 82.55%.¹Commonwealth Ombudsman – State of the Health Funds Report 2023–24, p14 This means members were getting back roughly 80 cents or so for every dollar they paid in premiums. 

It’s a bit of a different story, though, when we take a peek at individual funds. In the not-for-profit camp, the greatest difference between funds and their benefits as a percentage of premiums was 8.30%. The for-profits variation was less than half that, at 4.10%.²Commonwealth Ombudsman – State of the Health Funds Report 2023–24, p14  

So, what does it all mean? There can be a lot of variety between the value different funds offer, even if they follow the same business structure. A not-for-profit fund might pay 80 cents for every dollar in premiums, while a for-profit could pay 90 cents; or it might be the other way around.   

Essentially, you might be better off checking a fund’s individual value for money, rather than assuming they’re cheaper based off their business structure. Who knew we had stereotypes about health insurance? 

Do not-for-profit health funds offer more coverage?

In health insurance, coverage can have two meanings. One is what services are covered, like physio or heart surgery. The other is how much you can claim back on a covered service. It’s the last one that we’re talking about here. 

So, where do our funds with the greatest market share fall, and who is more likely to leave you more out of pocket? It turns out, if you’re looking at how many eligible services were paid in full, there’s really not all that much difference between the for-profits and not-for-profits. On average, for-profit members didn’t have a gap payment 89.15% of the time in 2023–24, and the not-for-profits were just behind with 87.98%.³Commonwealth Ombudsman – State of the Health Funds Report 2023–24, p19

Zooming in a little, let’s talk about extras. After all, you’ll hopefully use your extras more, making the most of all that preventative or first-step treatment, rather than needing to use your hospital cover for surgeries and the like. This time, we’re looking at how much of a service was covered by a health fund. In 2023–24, for-profits covered 52.63% of every extras service on average. Not-for-profits covered 47.22%. Both are pretty much a half-price deal from your wallet’s perspective.⁴Commonwealth Ombudsman – State of the Health Funds Report 2023–24, p19

But what do these numbers mean outside of an Excel spreadsheet? Again, it’s probably worthwhile to compare health insurance with an open mind – at least in regard to whether a fund is not-for-profit. At worst, keeping your blinkers on could mean you’re missing out on a great health insurance deal. At best, you’re just missing out on a bigger range of options to pick from. 

Helpful tip

Remember, it’s important to regularly review your health insurance to ensure it still suits you and your needs. At the end of the day, what you get out of your health insurance matters more than whether you’re with a not-for-profit health fund. In fact, you might find that you switch between not-for-profit and for-profit health funds over your lifetime.

Andres Gutierrez

General Manager – Health

Is a not-for-profit health insurer right for me?

This is something for you to decide.  

Ultimately, health insurance is about finding a policy that suits your unique circumstances. What are your healthcare needs? What would a policy that gives you peace of mind look like?  

Of course, it can be worthwhile to factor in the insurer, too. For example, before you fall in love with a policy, it’s worth checking whether it’s part of a restricted health fund, and whether you’re eligible. Many not-for-profit health funds are restricted funds, but there are open not-for-profits, too. 

It’s also worth considering where your insurer does most of its business. For instance, they might offer cover in all Australian states, but the majority of their eligible providers and gap agreements are on the east coast. Ideally, your insurer would have a large network in your area, making it easy to get the most from your policy. 

Where can I find and compare health insurance?

There are lots of factors to consider when you’re looking at health insurance, from the kind of coverage you’d like to whether you want to go with a not-for-profit fund. iSelect can help you compare a range of health insurance policies from different funds to find one that suits. Simply speak with one of our health insurance comparison experts on 1800 784 772 or use our online comparison tool.