The IHS indicator turns green when there is a broken circuit between the two IHS leads. In normal operation this should only happen when the torch is down on the material and disconnects from the brass piece on the lead nut. In your system there is something else that is breaking that connection all the time. The normal state of the indicator light is off.
This could be something inside the electronics (try shorting together the pins of the IHS input port) or in the cable connectors (try shorting the blade terminals together), or its in the Z-Axis assembly itself (try and look and see if there is any obstruction preventing contact when the torch is lifted off the material).