Fat is inherently unhealthy for you beyond some low baseline level.

Additional muscle is positive for health, but only up to some reasonable threshold. There is no health benefit to having very high levels of muscle, and in fact it may be negative for your health at extreme levels. E.g. many bodybuilders have trouble breathing, sleep apnea etc.

Both people in the example have 60lbs of fat. 1lb of muscle doesn't cancel out the negative health effect of 1lb of fat