Like the sound of ‘Not for Profit’? While the term can be used to describe charitable organisations, which are run not to earn a profit, but to do some good in the world, ‘Not for Profit’ can also be used in the world of health insurance.
While ‘Not for Profit’ health insurance is not a charity, it is run to benefit members. By concentrating on its members instead of creating profit for shareholders, ‘Not for Profit’ health insurance can provide more affordable cover.
How does standard health insurance work?
Many of the bigger health insurance providers in Australia are ‘For Profit’. That means they have shareholders, and they have to keep those shareholders happy. How do you keep shareholders happy? By making bigger profits, of course.
How does ‘Not for Profit’ health insurance work?
A ‘Not for Profit’ health fund is a mutual organisation. That means it operates for the benefit of its members. How do you keep members happy? By providing a high standard of health insurance at a low cost.
Because a ‘Not for Profit’ health fund doesn’t have to worry about earning higher profits for its shareholders, it can concentrate on making its members happy.
Premiums paid in go directly towards providing healthcare for members. Unlike a ‘For Profit’ health fund, where surplus revenue may go to shareholders, with a ‘Not for Profit’ health fund, any surplus revenue is reinvested back into the fund.
This can help to minimise premium increases for members, and provide new health and wellness programs.
Premiums into Benefits
One way to look at the difference between ‘For Profit’ health funds and ‘Not for Profit’ health funds is to compare the percentage of members’ premiums paid out in benefits.
In 2010-2011, the average ‘Not For Profit’ health fund paid back 88% of premiums to members, while the average ‘For Profit’ only paid back 87.5%.
As an example, during that period, ‘Not for Profit’ health fund GMHBA paid out 88.24% back to its members. That means for every dollar paid in by members, 88.24 cents was paid back out in benefits.
While the difference between ‘For Profit’ and ‘Not for Profit’ doesn’t sound that much in single dollar terms, when you add up how much you pay in health insurance premiums over a lifetime, those differences can really add up.
Is ‘Not for Profit’ right for you?
Finding the right health insurance involves comparing a number of different options, some will be ‘For Profit’ and some will be ‘Not for Profit’. To find the right policy, you would need to think about how much you are paying out in premiums, and how much you are getting back in return.
Think about the cover you need, and the cover you are getting. Think about whether you need Hospital Cover or Extras Cover, or both. Think about how much you are willing to pay in excess or co-payment. Most importantly, read the terms and conditions.
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