If we reject the gospel when it is offered to us, we come under condemnation. Refusing the message is refusing the gift of the atonement. It cannot fully apply to us if we do not fully accept it.
Reference: The phrase “better for them if they had not been born” also appears in a particular context in both the New Testament and the Doctrine and Covenants:
The Son of man indeed goeth, as it is written of him: but woe to that man by whom the Son of man is betrayed! good were it for that man if he had never been born. (Mark 14:21)
They are they who are the sons of perdition, of whom I say that it had been better for them never to have been born;
For they are vessels of wrath, doomed to suffer the wrath of God, with the devil and his angels in eternity. (D&C 76:32–33)
Both passages describe the worst possible scenario. Judas as betrayer and the sons of perdition who are fated to undergo the second death, failing to be redeemed by Christ’s atonement. Robert J. Matthews explains:
The atonement of Jesus Christ ransoms and rescues all mankind, without exception, from both deaths brought by the Fall of Adam. This means that every person will die physically and every person will be resurrected physically from the grave and be given everlasting life. In like manner, every person, regardless of worthiness or unworthiness, will also be reclaimed from the spiritual death and will be brought back into the presence of God for the Final Judgment. No matter how wicked or unrepentant, every person will, after the Resurrection, be brought back into the presence of God for judgment. Thus all will be reclaimed from the two deaths that resulted from the fall of Adam. Those who are righteous will remain in his presence. Those who are still unclean and filthy at the time of judgment will be sent away from his presence a second time, and thus they die a second spiritual death. Only the sons of perdition suffer the complete second death. This is clearly detailed by Samuel the Lamanite in Helaman 14:15–18, by Moroni in Mormon 9:12–13, and by the Lord in D&C 29:40–44 and 76:37–38.
This context of remaining unredeemed explains Mormon’s description, “It would be better for them if they had not been born.” He was not discussing the sons of perdition specifically but anyone who rejected the Atoning Messiah and the benefits of the atonement.