What is a not-for-profit health fund and why join one?

By Ysabel Tang

2 minutes

14 January 2019

What is a not-for-profit health fund?

When you buy health insurance, there’s a bunch of things you should consider. One of them is whether you’d like to join a not-for-profit or for-profit health fund.

But what does not-for-profit really mean when it comes to health insurance? And what are the benefits of joining a not-for-profit health fund over one that runs for-profit?

We’ll answer those two important questions and more in this article.

What does not-for-profit really mean?

‘Not-for-profit’ businesses still aim to make a profit—it’s how not-for-profits spend money that sets them apart from for-profit businesses.

A not-for-profit uses any money it makes to further its cause and cover the cost of running the business, like paying utilities bills and staff. Any surplus earnings (profits) are also used to help further the not-for-profit’s mission.

For-profit businesses use some or all profits to pay shareholders or investors. Basically, some of the money that flows into a for-profit business will always go to shareholders or investors.

Why join a not-for-profit health fund?

The main reason people join not-for-profit health funds is because they are member-based organisations.

This means that premiums collected by a not-for-profit health fund will always be used in the interest of its members—and never end up in the pocket of shareholders or investors.

Any money a not-for-profit health fund makes is used for just three reasons:

  1. to pay out claims,
  2. to improve services for its members,
  3. and to run the business.

Not-for-profit health funds use profits to give members a better health care experience, which can come in the form of lower premiums, better services or new benefits.

Can anyone join a not-for-profit health fund?

Of the not-for-profit health funds, there are those open to anybody and those only open to people who work in a specific industry (called ‘restricted’ health funds). Restricted funds include Teachers Health and Police Health.

HBF is one of the largest not-for-profit health funds in Australia and is open to everyone. Unlike health funds that are only open to people who work in a particular industry, anybody can join HBF.