HARRISBURG — Pennsylvania's two largest health insurers on Wednesday abandoned their nearly 2-year-old plan to merge, citing resistance from state regulators concerned that it would stifle competition.

Blue Shield affiliate Highmark and Independence Blue Cross said in a joint statement that they withdrew their applications with the state Insurance Department because they would not accept the agency's demand to relinquish either the Blue Cross or Blue Shield brand before the merger could proceed.

Maintaining both brands was critical to the merger's success, said the chief executives of the nonprofit companies. The companies had projected more than $1 billion in savings over six years — partly from the elimination of 745 to 1,200 jobs — and pledged that $650 million of that amount would go to assist uninsured Pennsylvanians.

"Throughout the review process, we have stated repeatedly that we would not give up one of our brands," said Kenneth Melani of Pittsburgh-based Highmark and Joseph Frick of Philadelphia-based Independence Blue Cross.

"While we believe that the combination as originally proposed would have been of great benefit to all our stakeholders, we concluded that giving up one of our brands would preclude the new company from delivering ... the full results we had projected," the statement said.

The combined company would have been Pennsylvania's largest health insurer, controlling more than half of the statewide market.

Numerous public hearings have been held on the proposal since the companies announced their intention to combine in March 2007.

Some state lawmakers, consumer advocates and other groups assailed the proposed merger, and the Senate Banking and Insurance Committee urged state Insurance Commissioner Joel Ario in November to block it.

The U.S. Justice Department had cleared the merger, but state Sen. Don White, R-Indiana, chairman of the insurance committee, said Wednesday that its review was not as thorough as the one undertaken by the state.

The Insurance Department would not have had any say over the transaction, however, without a law signed by Gov. Ed Rendell over the summer authorizing the agency to accept or reject it.