March 10^th, CMS issued a proposed rule that seeks to change how plans sold on and off the Affordable Care Act’s (ACA) Marketplaces (plans for individuals and small businesses), would cover gender affirming care services, which the rule calls “coverage for sex-trait modification.” The rule proposes, beginning plan year 2026, to prohibit insurers from covering gender affirming care as an essential health benefit (EHB), which could lead insurers to drop coverage or shift costs to individuals and states.

While the policy aim of the proposed rule aligns with the administration’s Executive Orders on gender and limiting access to gender affirming care, certain provisions of these orders are currently subject to preliminary injunctions and the agency states that the proposal “does not rely on the enjoined sections of the executive orders in making this proposal.” Instead, CMS writes that they are proposing the prohibition “because coverage of sex-trait modification is not typically included in employer-sponsored plans, and EHB must be equal in scope to a typical employer plan…” CMS does not provide support for this assertion, instead stating that they find that “0.11 percent of enrollees in non-grandfathered individual and small group coverage market plans utilized sex-trait modification during PYs 2022 and 2023.” Utilization of gender affirming care services is expectedly low in the population overall because only a small share of the population is transgender and not all transgender people seek gender affirming medical care. Further, utilization of a service may be a poor proxy for how commonly it is covered. There are other cases where a small share of the population uses a service that is generally covered by insurance. For example, there were fewer than 5,000 heart transplants in the US in 2023 (equaling one ten thousandth of a percent of the population) but public and commercial insurance typically covers this service.

Coverage of gender affirming care services in employer plans is fairly common. KFF’s 2024 Employer Health Benefit Survey found that about one-quarter (24%) of large employers (200 or more workers) stated they covered gender-affirming hormone therapy, a plurality of respondents did not know if they covered these services (45%), and less than one-third (31%) did not offer coverage.  The largest firms in the country (5,000 or more workers) employ 43% of people with job-based coverage and were significantly more likely to report covering hormone therapy in their largest plan (50% offered coverage, 18% did not know). In 2023, KFF’s Employer Health Benefit Survey found a similar trend relating to gender-affirming surgery. Among large employers (200 or more workers) offering health benefits, 23% provide coverage for gender-affirming surgery in their largest health plan, with 40% indicating they did not know.  More than 60% of the largest firms provide coverage for gender-affirming surgery (and 12% did not know). While for both services, there was uncertainty among employers over the details of coverage, many large employers provided coverage. 2022 data from Mercer and 2025 data on fortune 500 company coverage from HRC found, as KFF did, that coverage rates are particularly high among the largest employers (where most US workers are covered).

If implemented, the proposal would likely have an impact on access and costs for individuals and states. Some plans might drop coverage and while plans could cover gender-affirming services outside of their EHB package, consumers would not be assured the same cost-sharing and benefit design protections as for services included in the EHB package. Costs accrued for gender affirming care would not be required to count towards deductibles or out-of-pocket maximums, and would not be protected from lifetime limits, increasing out-of-pocket liability. Given that transgender people are more likely to be living on lower-incomes than cisgender people, higher costs could pose a particular challenge. Increases in out-of-pocket costs would likely deter enrollees from accessing gender-affirming care services, which are medically necessary and recommended by practically every major US medical association.

States, including about half that prohibit transgender care related exclusions, could also be faced with defraying the cost of covering these services under certain scenarios. The proposal states “if any State separately mandates coverage for sex-trait modification outside of its EHB-benchmark plan, the State would be required to defray the cost of that State mandated benefit as it would be considered in addition to EHB….However, if any such State does not separately mandate coverage of sex-trait modification outside of its EHB-benchmark plan, there would be no defrayal obligation..”

The proposal also raises questions about whether the policy would violate the ACA’s major sex nondiscrimination protections (under Section 1557).  Sec. 1557 protects against sex (and other) discrimination in health care and while the Trump Administration has suggested that it will view these protections based on biological sex assigned at birth only, courts can and have said that those protections extend to sexual orientation and gender identity. This interpretation also differs from the opinion issued by the Supreme Court in the Bostock case which found employment sex-based nondiscrimination protections extend to sexual orientation and gender identity.