Must not have noticed it considering I was playing at a modest difficulty for me. I just thought it shut down growth. If unhappiness slashes your revenue and hammer significantly, then yeah it wouldn't make sense to add a health mechanic for the sake of it. I just prefer a little more detail as opposed to the broad generalization of unhappiness.
Up to -10
there's 75% penalty to growth only, after that there's -33% combat penalty to your troops and 50% production penalty. Also rebel barb units are showing up in your teritory.
Initially being in red was nothing scary - put a GG with your troops and -33% become -8% (Chinese GG made it +2%, once playing China due to vanishing luxuries bug I got to -79
on Immortal and yet I've won the game), as for the production you could still buy buildings and units without any problems.
Now that GG and trade posts got nerfed it's not that easy to roflstomp beyond -10
treshold and rebels can be pain.
Yeah, I'm on a fence with global happiness myself, also with no palace distance maintenance you can have five cities spread all over the world - I'm more of a fan of consolidated territory.
So what becomes of essential resources like fish and crops? Now these are relegated to just food bonuses, but it there a reason to acquire them if you are getting enough food from your other raw food resources? They don't add to your happiness I'm sure. I believe some buildings yield extra benefits if you have this food source as opposed to another, but is it important to acquire other food resources to sustain yourself without the health mechanic? Ie) would I need sheep when I have plenty of cattle, or wheat when I have plenty of rice and what not?
Before the patch some food resources were really bad (sheep I'm talking to you), and people were complaining that it would be better to put a trade post on that tile instead of pasture.
Thankfully now there are food-related buildings to put in your cities and that makes food resources interesting, sheep-heavy city get a nifty production bonus with Stables, while wheat, deer and bananas with granary make your city explode with growth.
But yeah, no more trading food resources, no more health