That can happen, depending on what type of IEM's you get. Custom made ones that seal your ear canals effectively shield your ears from ambient sound, so it's easy to run them at a much lower SPL than you'd experience without them. The down side of them is the same thing; if you don't pipe it in, you don't hear it. If you don't mix in some sort of ambient mic, you might feel isolated from the rest of the band.Does having the IEMs in place damage your hearing like using ordinary headphones can, I imagine in a band scenario the IEMs would have to be turned up quite loud to be heard above amps/drums etc
The other way some folks do it is with cheap earbuds that don't seal, so a lot of ambient sound gets in. With those you might experience what you are talking about.