I don't think it can be classified as a 'bug' when you are intentionally and from an external locale editing in-game data on the fly.
The game is being presented with a scenario totally outside normal operation, and lacking any explicit instructions on how to handle the unknown criteria, just wings it.
In this case it seems the low-health graphic effect is triggered when damage received value would carry your health value into the warning area. However, because the health value itself doesn't change, you're not giving the game the chance to note health being restored back up past the warning point.
Try this: Activate the option, then do something that would hurt you so much that it starts this warning effect. Then deactivate the option and do the painful thing again, then heal yourself properly. Does the effect go away?
If it does, QED.
No, it doesn't. I activated the option, jumped off a high building so that the warning screen occurs. The health is freezed at four bars. Then, I deactivated the option and went in a fight and let the enemies deplete the health to the point where the warning area normally occurs. Then, I fled from the fight and waited until the bar is fully recharged by itself again. Although the bar is full, the effect still is there! It just stops when I'm reloading, just like I said.
It's not my intention to let the screen appear. Sometimes, because the controlling is very messed up and difficult in this game (or all ACs in general), Edward jumps off instead of doing what I want and falls down, so that I have to go up where I want again. But the warning screen is there and doesn't go away. It's pretty annoying when you are at a point where the last checkpoint of a mission is far away and you have to reload it and do it all over again because this warning screen is hindering your sight.