Yeah, like phob noted it acts as a buffer that pests have to eat through before the Knight's actual HP is affected; I cobbled together a squad including Cowslip (Maid) and Spade-chan for testing and the latter had ~29k extra HP thanks to the former's ability. It looks like Knights who have access to overheal via ability or Flower Memory retain any light green HP they gain too, it just doesn't show up until the buffer is wiped out or until the current fight ends.