The Internal Revenue Service has issued finalized rules for the individual mandate portion of the Affordable Care Act, President Obama’s healthcare plan.

The individual mandate penalty has long been one of the contentious components of health care reform, with lawsuits questioning the constitutionality of the law reaching the Supreme Court.

Under the new rules, individuals choosing not to carry insurance are subject to a penalty of $95 per person each year, or 1% of household income, whichever is greater, beginning in 2014. Over time, the penalty increases, so that by 2016 the penalty is $695 per person, or 2.5% of household income. Subsequent years will be calculated based on a cost-of-living formula.