Does the area around the flag have to be no cover? Are there any issues with yellow or green cover not functioning properly around the point due to this?
Those usually overwrite red cover so they should work if you stand actually in the yellow/green cover.
I imagine it is somewhat buggy with the common sandbags people put around capture points, if you get flanked you might be technically in red cover. The red cover doesn't extend that far from the circle so usually only a few models are inside it and you wouldn't even know. If the sandbag gets destroyed you will have the entire squad clumped in red cover.