That's one of the interesting things about the game, imo. There's a ton of mechanical stuff that would be completely broken in other games but usually tempered by some other extremely dumb mechanic or is made inconsistent via lag. You spend the vast majority of the time guarding or dodging, sure, but I think the game punishes it via the scoring system because outside of being part of a 2-on-1 or 3-on-1 in a team deathmatch/battle, there's a opportunity cost to staying put and playing pure defense. Also, the health regeneration, ironically enough, is balanced out by the abundance of 100% combos, most of which need a raw H to start which is pretty risky. It basically means that if you drop a combo it's as if you never hit them at all, and it makes safe things like lean attacks and ground strings pretty weak outside of baiting 360 attacks because the damage output doesn't add up. It would be a much worse and repetitive game without health regen, definitely, because I think safe and effective/easy offense would remove a lot of the strategy in the game.
If anything, I hope more new players realize I can sit there and defend them all day, so they don't keep doing dash attacks at me when I try to leave which forces me to sit there and dance for 30 seconds.