Merc's life halves upon its level increase

Sometimes when a mercenary levels up, its live halves at once. However, it doesn't happen always, and I haven't noticed any specific Pattern for when it happens, and when it does not. Any ideas what's behind this anomaly?

Maybe BO is disappearing upon level up?

Oh yeah, it's a know bug. I think this was also happening back in the legacy LoD as well. Merc does heal to full if their health is lower than specific % like you always do when you level up. It's very weird but I got used to it at this point. xd
I think I tested it out and I'm like 80% sure that their life doesn't actually drops to half, it's more like a visual bug.

Yes, I do remember this happening in LoD as well. As to the actual health amount vs a visual bug on the health bar, I am not so certain, as I noticed the health numeric value corresponds to the health bar proportionally. It could be just a random bug, as I've experienced this with various character/mercenary combinations played.

The number does correspond but the actual dmg they are taking is not -- is what I was aiming with my previous comment. It would say they are at half life visually (bar) and numerically but they would still keep receiving dmg and their numbers don't change (at least not drastically). After some time they begin to heal...

Now there is another bug related to this, and that's when it shows like your Merc is full HP but then they get like 2 shotted and die instantly. If you try to re-create the similar situation you can see their HP bar slowly but steadily going down from like the same boss/unique group with same mods. Now that is very weird.
It feels like it's coded for them to "die from random factors" from time to time just so you get used to it you can't save them all the time; but it's not, it's a simple visual bug that makes you feel like that. At least that's my knowledge so far.