Yes, it has been missing since version 23.04 since we had to change the annotation system. We might add it back eventually, but it’s currently not a high priority.
It is actually possible to set a transparent background color using the “Alpha channel” spin box in the color picker dialog, but that’s not the same visual effect as the highlight effect.
Highlighting is a critical tool for annotating and it’s sad to hear that this isn’t a priority. True highlighting is a mode overlay that gives superior results to just reducing the alpha.
After moving to Wayland I can no longer use ksnip to capture and this missing feature is glaring. I suggest using Export > ksnip as a better workaround.