It seems that the number of models in a squad is based on the unit's HP. When a Hero levels up only their HP Cap increases. The result seems to be that a Squad can level up enough that when it's current HP is lower then the Max HP by the total amount of HP for a single unit that the size of the unit drops.

Example is a Party of 4 with 20 HP levels up to have more then 28 HP for it's new cap then it now shows 3 members in the Party instead of 4. I've notice this isn't always instant and sometimes updates when the unit goes to town to "heal". Or when it does combat after level up even though it took no damage.

The easy fix to this is units that level up should actually GET the HP along with the cap increase. Either that or actually track the HP of models in a unit individually but that's probablly a bit more work.