Right, pretty much what Misery said. You still outrange most enemies, but what this does is give some of them a chance to land some shots if you approach too many of them at once. This encourages the use of either range-increasing stuff for your weapons, or the use of halls and other blind alleys, or the use of mines or turrets, or the use of stealth, or simply the judicious selection of which targets you hit first. Or how you use AOE. Or cover.
In other words, I think that it creates a pain point which has not one, but many solutions, which is the idea. We'll see how it bears out in testing, but so far with my playing on Hard for testing purposes it feels pretty natural. I'm not playing full missions at the moment, though.