What is a Not-For-Profit Health Fund?

A ‘not-for-profit’ health fund is one where the premiums paid into the fund are used only to pay out benefits benefits for members and to operate the business. In contrast, ‘for-profit’ funds aim to return a profit to their owners. The owners may be shareholders – for example Medibank Private, which is listed on the Australian Stock Exchange, or a corporation – for example Bupa, which is owned by (and sends profits to) its UK-based parent company.

Recent figures show that members of not-for-profit-funds are better off than those in profit-generating funds – enjoying either lower premiums or higher benefits, or a combination at the two. Members of not-for-profit funds received on average 88.9 cents back in benefits for every premium dollar paid, compared to 84.8 cents for members of Australia’s top three for-profit funds – Medibank, Bupa and NIB – which have two-thirds of the market.

For-profit health funds are generating huge profits (Medibank Private’s 2018 profit was $445 million), while consumers are coping with premium rises that are typically well above the rate of inflation, as well as a declining percentage of government premium rebate.

Not-for-profit health funds include Defence Health, HBF, HCF, and Mildura Health. A full list of not-for-profit funds is available online.

Note that some not-for-profits impose membership restrictions, however many do not. Not-for-profit health funds also tend to have a lower incidence of preferred provider agreements and differential rebate schemes, which can also benefit the consumer.