I guess that you mean vertically (along z direction), there are different materials, eg, the Y branch is silicon, but in between the waveguides of the Y branch, it has other different materials. Since the VarFDTD method uses the waveguide mode to get the effective index of all other regions, it is ok to place the green cross in the silicon waveguide. The effective index at all other locations will be calculated automatically. You can refer this ring resonator example,
https://support.lumerical.com/hc/en-us/articles/360042800293-Ring-resonator-getting-started-Design-and-initial-simulationthis file ring_resonator.lms has ring and bus waveguides that stand up. However the other region (substrate,air) will be able to get the effective index for the simulation. The fundamental principle can be found here
https://support.lumerical.com/hc/en-us/articles/360034917213-MODE-2-5D-varFDTD-solver-introduction-
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