The Spain international had a high-profile falling out with Blues boss Antonio Conte at the end of last season, before finally getting his wish of a return to Atletico in September.
Costa is unable to play for Los Rojiblancos until their ban on registering new players expires in January, though, and Simeone did not want the distraction of having the 29-year-old watching on from the Stamford Bridge stands.
Asked about his decision to block a reunion, Simeone told reporters: "Because I am the manager. I made the best decision what I think was best for the team.
"I don't think we need to think about that too much. We need to think about our game."
Costa was present at the Wanda Metropolitano when Atletico lost 2-1 to Chelsea in the reverse meeting at the end of September.