Summary: On March 10, 2025, the Centers for Medicare & Medicaid Services (CMS) released the "2025 Marketplace Integrity and Affordability Proposed Rule," (Proposed Rule) addressing various aspects of the Affordable Care Act’s (ACA) health coverage exchanges and proposed changes. This appears to be the first healthcare-related proposed rule released by a federal agency under the second Trump administration.
This article primarily discusses the policy change under the Proposed Rule that would prohibit non-grandfathered individual and small group market health insurance coverage from providing coverage for what CMS refers to as "sex-trait modifications” (and more commonly known, at least currently, as “gender-affirming care” in healthcare-related parlance) as an essential health benefit (EHB), beginning with the 2026 benefit plan year. To avoid confusion, this article will use the term “sex-trait modifications” interchangeably with the terms of “gender-affirming care” and “gender identity-related care.”
Read on for more information and the potential impacts to gender identity-related care coverage under employer-sponsored group health plans.
Essential Health Benefits Background
Fully insured plans in the individual and small group markets must cover a core set of items and services, known as essential health benefits (EHB). The ACA requires EHBs to reflect the scope of benefits covered by a typical employer-sponsored group health plan and to cover at least the following 10 general categories of items and services:
- Ambulatory patient services (outpatient care)
- Emergency services
- Hospitalization
- Maternity and newborn care
- Mental health and substance use disorder benefits, including behavioral health treatment
- Prescription drugs
- Rehabilitative and habilitative services and devices
- Laboratory services
- Preventive and wellness services and chronic disease management
- Pediatric services, including oral and vision care
The ACA directed the U.S. Department of Health and Human Services (HHS) to more specifically define the items and services that comprise EHB. HHS developed a state-specific benchmark approach for defining EHB, where each state selects its own benchmark insurance plan from a set of options designated by HHS.
Generally, the items and services included in a state’s benchmark plan comprise the EHB that fully insured health plans in the state’s individual and small group markets must cover. Click here for a CMS webpage with more information on EHB benchmark plans.
Cost-Sharing Limits
The ACA requires non-grandfathered health plans to comply with an overall annual cost-sharing limit with respect to their coverage of EHB, called an out-of-pocket maximum.
Cost-sharing generally includes any expenditure required by or on behalf of a plan participant with respect to EHB, such as deductibles, copayments, coinsurance, and similar charges, but excludes premiums and spending for non-covered services.
Health plans that are not required to cover EHB (such as self-funded plans of any size and fully insured large employer group plans) are still required to comply with the out-of-pocket maximum for any covered benefits that fall within the scope of EHB.
Proposed Rule Prohibiting Coverage of Gender Identity-Related Care as an EHB
The Proposed Rule’s prohibition on gender identity-related care as an EHB in the individual and small group market derives from two recent related Executive Orders (EO) by the Trump Administration:
- An EO, issued on January 20, 2025, requires agencies to “take all necessary steps, as permitted by law, to end the Federal funding of gender ideology.”
- An EO, issued on January 28, 2025, with the stated goal to prohibit or limit gender-affirming care for Americans under 19 years old by withholding federal funding and directing federal agencies to take measures to prevent surgeries, hormone therapy, puberty blockers, and other gender identity-related care services. Notably, this EO directs the HHS Secretary to take “regulatory and sub-regulatory actions” (of which this Proposed Rule is in fact) to achieve its goal. Moreover, HHS also recently rescinded its guidance on gender-affirming care from March 2022 as directed by this EO, stating the 2022 guidance no longer reflects its views.
CMS, in the Proposed Rule, acknowledges that two courts have already issued preliminary injunctions relating to both of these EOs and states that “any final rule on this issue would not be effective until PY 2026, and would not be implemented, made effective, or enforced in contravention of any court orders.”
The Proposed Rule continues on to confirm that health plans may still voluntarily choose to cover gender identity-related care as a non-EHB consistent with applicable state law. However, non-EHBs are not subject to the cost-sharing limits imposed under EHBs, which will likely increase plan participant out-of-pocket costs to receive such care.
Notably, the Proposed Rule contains a footnote detailing that currently:
- The EHB-benchmark plans for California, Colorado, New Mexico, Vermont, and Washington specifically include coverage of some gender-affirming care.
- The EHB-benchmark plans of six other states do not expressly include or exclude this coverage, and
- The EHB-benchmark plans of 40 states include language that excludes such coverage.
Furthermore, the Proposed Rule comments that there are some medical conditions where items and services that are also used for “sex-trait modifications” may be appropriate. Precocious puberty and therapy related to traumatic injuries are provided as examples of such medical conditions. CMS is seeking comments regarding whether to define explicit exceptions to permit the coverage of such items and services as EHB for other medical conditions (and what those conditions are) for potential inclusion as part of a final rule.
Potential Impact To Employer Group Health Plans
Since this is simply a Proposed Rule[1] subject to a notice and comment period, there is no immediate impact to most employer-sponsored group health plans. However, employers sponsoring group health plan coverage should be aware of the potential impacts of its proposed EHB exclusion for gender identity-related care, if (or when) finalized, including:
- Coverage Changes: Group health plans that align their benefits with EHB standards may need to revise their coverage policies to exclude coverage of gender-affirming care or voluntarily cover these items and services as a non-EHB.
- Employee Relations Concerns: This proposed exclusion raises concerns regarding coverage for medically necessary procedures for employees and their covered dependents seeking gender-identity-related care. Depending on the terms and design of the applicable group health plan, these individuals could possibly face higher out-of-pocket costs (as a non-EHB), or will have to find alternative coverage options outside of their employer-sponsored group health plan if completely excluded from coverage.
- Cost Implications: Employers might see overall decreases, albeit minimal, in plan premium amounts due to wholesale exclusions of these items and services from EHB coverage.
More peripherally with respect to employer group health plans, the Proposed Rule will also shorten the annual Open Enrollment (OE) period for individual coverage offered through the ACA Marketplaces by ending it on December 15, starting for the January 1, 2026 benefit plan year. This change, resulting in a 45-day OE period,[2] is intended to align with typical open enrollment dates of “many employer-based health plans.”
The Proposed Rule, according to CMS, aims to provide “additional safeguards to protect consumers from improper enrollments and changes to their health care coverage, as well as establish standards to ensure the integrity of the Marketplaces.” To learn more about other aspects of the Proposed Rule that might increase enrollment in employer group health plans, click here for the related press release and here for the fact sheet.
On a final note, it’s worth mentioning that the Proposed Rule confirms it will comply with another EO titled “Unleashing Prosperity Through Deregulation,” requiring that for each new federal agency regulation issued, at least 10 prior regulations be identified for elimination. This means that CMS/HHS will seemingly need to repeal at least ten existing rules with the finalization of the Proposed Rule, unless they identify an exception that applies.
Risk Strategies is closely following developments and will provide updates when available. In the meantime, click here for a Risk Strategies article with more information about an upcoming Supreme Court decision in this space.
Contact your Risk Strategies team members with any questions or contact us directly here.
[1] Comments to the Proposed Rule are due April 11, 2025.
[2] A 45-day OE period was in effect for ACA exchange coverage plans from 2018-2021 benefit plan years, whereas the 2022-2025 benefit plan years generally had a 76-day OE period.
