The Obama administration dealt another blow to the insurance industry on Monday after it forced two Michigan companies to abandon plans for a deal because of antitrust concerns.

Competition authorities at the Department of Justice said a subsidiary of Blue Cross Blue Shield of Michigan had abandoned its proposed takeover of Physicians Health Plan of Mid-Michigan after the DoJ told the insurance companies it would file a lawsuit to block the deal.

The decision marks the second time that Christine Varney, head of the DoJ's antitrust division, has scuppered a deal following a lawsuit or, in this case, a threat to file suit.

In two other cases, one involving Ticketmaster and another involving Rio Tinto, Ms Varney negotiated settlements with the companies after signalling that the DoJ was prepared to sue to block their deals.

Monday's development was further evidence that Ms Varney is keen to examine concentration within the healthcare industry and believes that the DoJ plays an important role in the administration's broader goal of increasing competition in the industry and lowering insurance costs.

The Michigan companies had originally estimated that their transaction would be cleared by the regulators by the end of last year but on Monday they acknowledged that it was obvious that the groups should move on given the "current regulatory climate".

Blue Cross Blue Shield of Michigan came under fire from Kathleen Sebelius, the health and human services secretary, last month after she said in a report that the group had requested regulatory approval to increase rates by 56 per cent. The group shot back that, after ultimately agreeing a 22 per cent rate increase with regulators, it still lost $280m in 2009 in its individual insurance business.

The DoJ on Monday said the group's proposed takeover of PHP would have given Blue Cross-Michigan control of almost 90 per cent of the commercial health insurance market in Lansing, Michigan, resulting in "higher prices, fewer choices and a reduction in quality".

Ms Varney said: "We welcome the decision by Blue Cross-Michigan and PHP to abandon their deal, which will preserve competition among health insurance companies in Lansing."

In a separate development, Ms Sebelius maintained the pressure on the chief executives of United Health, WellPoint, Aetna, Health Care Services Corporation and Cigna by demanding that the executives publicly justify proposed health insurance premium increases.

Ms Sebelius has been banging the drum loudly about increases in insurance premiums in the run-up to an expected vote on healthcare legislation this month.

The administration has criticised the industry relentlessly in an effort to make its case about why health insurance reform is necessary. The insurance groups blame the rising cost of drugs, physician payments and hospital fees for premium increases.