Health care costs for transgender Americans could increase starting in 2026, if a recently proposed rule from the Centers for Medicare & Medicaid Services (CMS) is finalized. 

The agency wants to stop insurance sold on the individual and small-group marketplace from including gender-affirming care — a change that would affect coverage for trans people with marketplace plans. Doing so means that insurers could drop coverage for trans people entirely or that trans patients could see higher out-of-pocket costs, experts say. 

Although the rule would not ban coverage of gender-affirming care outright, it would disrupt care for a vulnerable population that faces disproportionate risks of living in poverty, being low-income and having greater medical needs. 

The proposed rule would affect “essential health benefits,” services that individual and small-group marketplace plans are required to cover. Essential health benefits refer to basic care, like hospitalization, mental health services and prescription drugs, as mandated by the Affordable Care Act. Under the proposed CMS rule, insurers would be barred from covering those services as essential health benefits when provided to trans people as gender-affirming care. 

Experts say this new rule will raise health care costs for transgender people and possibly encourage health insurance companies to deny claims involving gender-affirming care, since the Trump administration is taking so many actions to oppose it. Carving out these restrictions would also burden health insurance companies, since gender-affirming care involves hospitalizations for surgery, mental health screenings and picking up hormone prescriptions: all services that count as essential health benefits. 

“If plans don’t cover gender-affirming care, it would of course impact anybody with marketplace coverage,” said Lindsey Dawson, director of LGBTQ Health Policy at KFF. “They would allow plans to cover these services, but not allow it to be captured in cost-sharing reductions or premium tax credits. So basically it would lead to an increase in cost.” 

But, the proposed CMS rule also has the potential to impact even more people. 

“There is a world in which this could raise out-of-pocket costs for trans people even on employer plans,” said Katie Keith, director of the Health Policy and the Law Initiative at the O’Neill Institute for National and Global Health Law at Georgetown University. The amount of money that trans people have to pay toward their deductible may go up, as well as out-of-pocket maximums. Even if a patient’s gender-affirming care was covered by an employer plan, this policy would remove the spending cap required by the Affordable Care Act to keep those costs low, she said. 

Ultimately, this means that transgender patients would face higher costs than cisgender patients for many of the same treatments, Keith said. In the proposed rule, CMS acknowledges that some medical conditions, including precocious puberty, require the same medical treatment as gender-affirming care. The agency, which is located within the Department of Health and Human Services (HHS), is considering defining explicit exceptions to permit the coverage of such care as essential health benefits when it is for cisgender patients. 

“They fully acknowledge these are general health care services that anybody could need, and they only want to limit them as essential health benefits for the purpose of treating gender dysphoria. It’s extremely targeted at trans people,” Keith said.

CMS argues that sex-trait modification is not typically included in employer plans and therefore cannot legally be covered as an essential health benefit. 

But coverage of gender-affirming care services in employer plans is fairly common, according to KFF. The health policy nonprofit found in a 2024 survey that about 24 percent of employers with 200 or more workers cover gender-affirming hormone therapy, while 50 percent of the largest companies in the country — those with with 5,000 or more workers — offer this coverage. Additionally, more than half of insurers providing silver plans — the most popular category in the ACA marketplace — currently cover medical treatments for gender dysphoria, according to a recent report from Out2Enroll, which reviews ACA plans for LGBTQ+ inclusion. 

Even the 24 states that explicitly prohibit transgender exclusions in health insurance could be affected under the new CMS rule. The proposal says that if any state requires coverage of gender-affirming care outside of a plan’s essential health benefits, then that state will have to take on the extra cost. 

Olivia Hunt, director of federal policy at Advocates for Trans Equality (A4TE), said she sees this new proposal as part of the Trump administration’s goal to undermine nondiscrimination protections for transgender people within the Affordable Care Act. The language of the proposal also seems to be designed to sow confusion as to what should be covered, she said. CMS refers to gender-affirming care as “sex-trait modification,” citing President Donald Trump’s executive orders that inaccurately describe gender-affirming care as “chemical and surgical mutilation.” 

“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. 

In the past few months, the Trump administration has tried to restrict trans Americans’ access to gender-affirming care by withholding federal funds to hospitals. Meanwhile, the White House has signaled its opposition to gender diversity as a whole and directed the National Institutes for Health to study regret rates of trans people who receive gender-affirming care. CMS is also telling states that they should not use Medicaid funds for gender-affirming care for minors.

If finalized, this new CMS rule could cause legal issues related to the Affordable Care Act’s Section 1557, which prohibits discrimination on the basis of race, color, national origin, sex, age or disability by health programs that receive federal funding. Specifically, those issues could arise if gender-affirming care is covered as an essential health benefit for cisgender people instead of trans people. 

The proposed policy is just one small piece of a larger proposal from CMS that, by one estimate, could cause up to 2 million people to lose their health care coverage in 2026. Experts have said that patients across the country could see higher premiums and out-of-pocket costs if the rule goes into effect.