I was hoping that when I choose a particular highlight in the outline as a "Focus" and select the option to "insert new highlight after focus highlight", then all new highlights, including the "auto-hidden" ones would become a child of the focus highlight. For some reasons this is not being done for the "auto-hidden" highlights, which are still being added as a sibling to the focus highlight and not as a child. The normal visible highlights follow expected behavior and add as a child. This seems to be a bug and may need resolution ...
Note - I have specified the only-highlighted items, with no additional content to auto-hide -- a very useful option provided in marginnote !