On August 11, 2026, the Centers for Medicare & Medicaid Services (CMS) finalized a rule restricting the use of federal Medicaid and Children’s Health Insurance Program (CHIP) funds for certain gender-affirming medical interventions provided to minors. CMS refers to these interventions as “sex-rejecting procedures.”
Rule at a Glance:
- Scope. The rule prohibits the use of federal Medicaid funding for specific procedures provided to individuals under 18 and federal CHIP funding for individuals under 19.
- Tapering period. For children already receiving hormone therapy when the rule takes effect, federal funding will remain available for up to six months.
- Mental health coverage unaffected. CMS emphasized that the rule does not touch coverage for mental health services. Medicaid’s Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) benefit and CHIP’s mental health coverage requirements remain in place.
- State-Only Funding. The rule restricts federal financial participation. It does not prohibit using state-only funds to cover otherwise permissible services.
- Effective date. The final rule takes effect October 13, 2026.
What This Means for Plan Sponsors and State Programs
While this rule is targeted at federal Medicaid and CHIP funding rather than employer-sponsored group health plans, it may have implications for employers and other stakeholders that coordinate coverage across public and private programs.
- Monitor state Medicaid responses. States may need to revise their Medicaid and CHIP coverage policies or determine whether and how to use state-only funds for services that will no longer qualify for federal matching funds.
- Consider coverage transitions. Employers and plan sponsors with employees or dependents who move between Medicaid, CHIP, and private coverage should monitor how state implementation affects coverage and access to providers.
- Watch for litigation. Legal challenges could delay implementation or otherwise affect the rule before its October 13 effective date.
We will continue to monitor developments, including any challenge and subsequent CMS or state guidance. A proposed regulation changing the conditions of participation for Medicare and Medicaid certified hospitals to prohibit those facilities from performing sex-rejecting procedures on children remains under consideration by the administration.
