The policy will come into effect in 2023 and applies to individual and group health insurance plans for companies with fewer than 100 employees. It is estimated to affect roughly a quarter of Colorado’s health insurance market.
The state legislature would need to act in order to require insurance plans for larger employers to pay for transition-related procedures.
More than a dozen states, including Colorado, already cover gender-affirming services in their plans for low-income patients.
However 12 states exclude it or have not addressed it, according to the Williams Institute.
‘Hopefully this marks a historic beginning’
“Today marks the first time that a state has looked to add gender-affirming care as an essential health benefit. Hopefully it marks a historic beginning,” said Chiquita Brooks-LaSurek, head of the Centers for Medicare and Medicaid Services which approved the measure.
Gender-confirming care refers to services including hormone therapy, hair removal, gender reassignment surgery as well as speech therapy and counselling.
The Biden administration also authorised Colorado’s plan to require coverage for an annual mental health wellness exam and treatments like acupuncture for chronic pain.
Critics of the measure argued it would lead to increased health insurance costs. The Colorado Association of Health Plans, an industry trade group, predicted a 1.5 per cent rate hike.
The announcement is the latest push by the Biden administration to expand transgender rights. Earlier this year the president issued an executive order banning discrimination based on gender identity in school sports and elsewhere.
But Mr Biden’s transgender agenda has met with a backlash in Republican-controlled states, with several proposing new restrictions.
In April, Arkansas became the first state to ban gender-confirming treatments or surgery for transgender youth.
West Virginia was among several states that approved restrictions on transgender athletes.
The Department of Justice ruled in June that the laws in both states violate the equal protection clause of the 14th Amendment.