Private health insurers in Australia operate under one of two business models. They are not-for-profit or for-profit.
All health funds are regulated by the Australian Government and provide access to private health insurance, however the way profits are used can differ depending on how the fund operates.
This article explains the difference between not-for-profit and for-profit health funds and why some people consider this when choosing a health insurer.
Key Points
- Private health insurers in Australia operate as either not-for-profit or for-profit organisations
- For-profit health funds distribute profits to shareholders or investors
- Not-for-profit health funds reinvest profits back into the fund, member services and operations
- All Australian private health insurers are regulated by the Australian Government
What is a not-for-profit health fund?
A not-for-profit health fund is a health insurer that reinvests its profits back into the fund rather than distributing profits to shareholders or investors.
Because not-for-profit health funds don’t need to pay profits to shareholders or investors, those profits can instead be reinvested into member services, technology, operations and the long-term sustainability of the fund.
Not-for-profit health funds still operate as businesses and are regulated in the same way as other Australian private health insurers.
What is a for-profit health fund?
A for-profit health fund is a health insurer that can distribute profits to shareholders or investors.
Like not-for-profit health funds, for-profit health insurers still provide private health insurance products and are regulated by the Australian Government.
For-profit health funds operate as commercial businesses, with profits able to be shared with shareholders or reinvested back into the business depending on the organisation’s priorities and structure.
Does being not-for-profit change your health insurance cover?
Regardless of whether a health fund is not-for-profit or for-profit, all Australian private health insurers are regulated by the Australian Government.
That means rules around things like waiting periods, community rating and minimum hospital cover requirements still apply across the industry.
When comparing health funds, it’s important to look at the cover itself, including what’s included, restricted or excluded under the policy, rather than focusing only on the business model.
What is community rating?
Community rating is a government rule that means Australian health funds can’t charge higher premiums based on a person’s health or claims history.
Does not-for-profit mean cheaper health insurance?
Not necessarily. The cost of health insurance can still vary depending on things like the level of cover, included services, excess options and the individual health fund.
While some people choose not-for-profit health funds because of the business model, it’s still important to compare the cover itself and whether it suits your healthcare needs and budget.
Are not-for-profit health funds financially stable?
Yes. Not-for-profit health funds still operate as regulated private health insurers and must meet financial and operational requirements set by the Australian Government.
Like other health funds, not-for-profit insurers are required to maintain reserves and manage the long-term sustainability of the fund.
Being not-for-profit doesn’t mean a health fund is run as a charity. Not-for-profit health funds still operate as businesses while reinvesting profits back into the organisation rather than distributing them to shareholders or investors.
Why do some people choose not-for-profit health funds?
For some people, choosing a not-for-profit health fund comes down to personal preference and values.
Some members like knowing that profits are reinvested back into the fund and its operations rather than distributed to shareholders or investors.
Others may place more importance on things like price, cover, customer service or digital experience regardless of whether a health fund is not-for-profit or for-profit.
At the end of the day, the right health fund depends on your healthcare needs, budget and what matters most to you.
Is one type of health fund better than the other?
There’s no single answer to whether a not-for-profit or for-profit health fund is “better”.
Both types of health funds operate within the same Australian private health insurance system and are regulated by the government.
For some people, the business model is an important factor when choosing a health fund. For others, things like price, cover, service and provider access may matter more.
Comparing what’s included under the policy and whether the cover suits your healthcare needs is often more important than focusing on the business structure alone, although for some people the type of health fund can still play an important role in their decision.
Is Phoenix Health a not-for-profit health fund?
Yes. Phoenix Health Fund is a not-for-profit private health insurer.
Phoenix Health is also a member of the Members Health Fund Alliance (MHFA), which represents not-for-profit and mutual health funds across Australia.
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