Make sure that Implicit Highlight is active, then paste the following code in the editor.

object Test {
  class Foo
  
  def foo(a: Int)(implicit f: Foo) {}

  foo(2) // <- error is reported because no implicit parameter `Foo` is in scope
}

The error squiggle is hidden by the implicit highlight coloration.

What i believe may be happening is that the Implicit Highlight coloration is performed after the red error squiggle is painted.