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.
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:
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.
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:
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:
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.
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:
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.