Hybrids are not just using ICE at highway speeds. They are charging the battery when the car is slowing, and going downhill. The traction battery is adding torque during acceleration and going uphill, thus allowing for a smaller more fuel efficient engine. And sometimes there is enough charge for EV at highway speeds. Non-hybrids get none of these advantages.
Smaller size helps with mpg but the biggest difference is the efficiency advantage of the Niro's Atchison cycle ICE.
Consider Hyundai/Kia 1.6L in multiple forms
GDI Gasoline direct injection, Otto cycle, 140HP, ~30% efficiency , e.g. base Kona ~30 mpg
GDI Gasoline direct injection, Otto cycle, turbo, 195HP , ~30% efficiency , e.g. higher trim Kona ~30 mpg
GDI Gasoline direct injection, Atchison cycle, 105HP, ~40% efficiency, e.g. Niro ~45 mpg
The Atchison cycle ICE works because as you point out the motor compensates for the reduction in HP.