For me what worked was: (right click)project->android tools->clear lint markers. Although for some reason the Manifest reverted to the old (lower) minimum API level, but after I changed it back to the new (higher) API level there was no red error underline and the project now uses the new minimum API level.
Edit: Sorry, I see you were using Android Studio, not Eclipse. But I guess there is a similar 'clear lint markers' in Studio somewhere and it might solve the problem.