I can think of three possible reasons (and there may be more). Firstly NPCs can and do use healing, you usually get the swirling light if they have. Secondly there are spells that absorb health from you and the opponent may cast these. Also some creatures have the ability to reflect your spells (ricklings for instance).
You only see the opponent's health bar for a few moments after a hit. The hand to hand fights in the game can be a pain if your level is not very high, as you keep losing the info about the opponent.
BTW - 'they're' is an abbreviation for they are, 'there' is an adjective meaning 'in that place' etc. The word you are looking for is 'their', belonging to them.
This free grammar lesson is supplied courtesy of the Malchik Academy of Erotic Art - er - sorry that should be 'Exotic' of course.