It does - otherwise you would know which numbers are queried to process the query, letting you narrow things down (ie huge side channel and thus not HE anymore).
Sure, you can query the database all you want. The important property is that the server cannot observe the client querying the database - processing a query occurs in an encrypted space that it does not have the keys to. Similarly, one would expect that each query, even if it's for the same phone number, would be observed to be reading randomly from the database each time.