if this is so why dont we increase the HE damage reduction of yellow cover?
Because it adds depth to gameplay. Not all cover is created equal and having a player understand when it is important to be in cover vs not is really important.
Keep in mind there are four cover types (red, grey, yellow, and green). Red is negative but offers speed bonuses to some units. Grey is not bonus, unit is stock, but is actually better against flames. Yellow offers light arms fire but tends to clump up squads, I think, flames also get a damage bonus here. Green cover offers small arms protection and indirect fire protection, but gives bonuses to flames hitting units in it. Green is also capable of stopping rounds from vehicles so if they flank you and fire into the back of green cover the can wipe the squad in short order. This complication makes the game more interesting by forcing players to make real decisions about whether or not to use cover, and where to seek it out.
If in doubt, always go green cover in early game. Avoid green cover when tanks are flanking, and avoid yellow cover in the late game when indirect fire is plentiful. Keep infantry out of red cover at all times. Use grey cover to cross from cover to cover.