New U.S. Rule Threatens Transgender Health Coverage, Raising Legal and Financial Concerns

The U.S. Centers for Medicare & Medicaid Services (CMS) has proposed a rule that could significantly alter how health insurance covers gender-affirming care for transgender Americans. Under the new policy, if a state mandates coverage for gender-affirming care outside of a plan’s “essential health benefits,” the state itself would be required to pay for that coverage, rather than insurance companies. This shift could discourage states from requiring insurers to cover gender-affirming treatments, making medically necessary care less accessible and potentially more expensive for transgender people nationwide.

The regulatory change is part of a broader trend of federal and state efforts to restrict access to gender-affirming care. Earlier executive orders have directed federal agencies not to fund or support medical or surgical transition care for minors, using language that opponents say stigmatizes essential medical treatments. The CMS rule follows a series of administrative actions designed to limit nondiscrimination protections for transgender people, particularly those provided under the Affordable Care Act’s Section 1557, which prohibits discrimination in federally funded health programs.

Olivia Hunt, director of federal policy at Advocates for Trans Equality, notes that the language of the proposal appears to intentionally create confusion about what insurance plans are required to cover, potentially enabling insurers to deny claims for gender-affirming care. “It’s intended to further the messaging of this administration that well-attested medical care for trans people is somehow not a valid form of medical care,” Hunt said.

If the new rule is finalized, it could have immediate and far-reaching consequences for transgender people seeking care. Experts warn that health care costs for transgender individuals may increase, and insurance companies may be emboldened to deny coverage for treatments that are standard in transgender health care, such as hormone therapy and gender-affirming surgeries.

Even in the 24 states that currently prohibit transgender exclusions in health insurance, the rule could create legal ambiguities and invite challenges to coverage mandates. This could lead to a patchwork of health care access, with transgender people in some states facing greater barriers than others.

The proposed CMS rule is expected to face significant legal scrutiny. Critics argue that it undermines the Affordable Care Act’s nondiscrimination guarantees and could violate federal law if it results in transgender people being denied medically necessary care that is covered for others. Advocacy organizations such as Advocates for Trans Equality and the National Center for Transgender Equality have called for the rule to be withdrawn, citing potential harm to the health and well-being of transgender communities.

Meanwhile, the move comes amid a wave of state-level legislation aiming to restrict access to gender-affirming care, especially for transgender youth. According to the Trans Legislation Tracker, dozens of bills have been introduced in state legislatures seeking to ban or severely limit such care.

Ongoing Battles Over Transgender Rights

The CMS proposal is one piece of a larger struggle over transgender rights in the United States. Transgender people already face well-documented disparities in health care access and outcomes, often caused by discrimination and lack of provider knowledge. Legal and policy changes that restrict care add to these challenges, threatening to exacerbate health inequities.

Advocates stress the importance of clear, inclusive health policies that recognize gender-affirming care as medically necessary and life-saving for many transgender people. The outcome of this policy battle will have lasting consequences for the health, dignity, and rights of transgender Americans.