It will apply in general for Haruka's party. So say Haruka is level 32 and Michiru is level 35, normally, you'd take Michiru's level 35 and add +2 for Haruka's presence. However, since Haruka is God of War, her effective level increases to 37, so she is considered higher. Thus, you'd instead take 37 and add +2, making Haruka and Michiru's effective level 39.