Does this mean the passive pool is making up my losses?

No. The pool only absorbs positions at a profit, that is, at a price that is favorable. This is why the backstop threshold exists: it’s a level at which the pool can still use the remaining margin balance to create a positions without immediately losing money on it.

So, if you are an LP, rest assured you are not making up any losses from traders. In particular, the passive pool will stop taking on positions as soon as an account’s funds aren’t enough to at least cover the liquidation fees. And remember, the pool gets 50% of fees of every liquidation, not just backstop.