Uh yes it would. Heck it would do that also as any reasonable person reading the rules would think I just flipped red joker now the rest of you eat severe. And under blasts it further makes an understanding of this with this line I will quote for you.
As well,the Red Joker's damage is stepped down to Moderate (not Severe) damage.
Which with out this rule you could easily do severe off blasts. So wyrd in their infinite wisdom decided that was too powerful. So made it balanced. So your musings are quite correct but rules make it balanced. I