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.
We added the ability to snap the highlighter to straight lines by holding shift, which allows you to make rectangles if the stroke width is wide enough, but that’s still not exactly the same as a rectangle highlighter tool.