Yeah, it's supposed to create some kind of virus (in the MCU version) in the blood stream, which screws with the chemistry and puts you under his control. But the speed it travels at is ridiculous. Kilgrave affected everyone in the hospital building virtually instantly, and there is absolutely no way he came into contact with every person in the hospital before he did that. To suggest that Mag's helmet will protect him from Kilgrave is like saying his helmet will protect him from HIV.
They explained it as a virus that literally infects people. Helmets can't shield people from viruses (well, Magneto's can't). Plus, he'd already been in contact with Luke before that, and this was after his powers had expanded, so the effects from the first mind whammy were likely still somewhat present when Kilgrave reinforced it over the phone. And the thing is that even when people were completely aware of the fact that they were being controlled, and mentally resisting with all their might, they still acted according to what Kilgrave told them to do.