So the possibility of such false positives is not that high, making still a good heuristic. Not to mention: if one is a thin, mostly-muscle powerlifter type, they already know they are not obese...
I'm not sure of the health factors but if you're training for 2 - 2.5 hours a day and dieting it can be normalish.
Why the down votes?
Check the scales: http://www.nhlbi.nih.gov/health/educational/lose_wt/BMI/bmic...
My body-fat percentage is definitely not 5%, though. My guess is that it's around 14-15%. Everyone drastically underestimates how low their body-fat percentage is, and I am not a bodybuilder. I lift heavy and like pasta.
[1] terrible picture of me from a few weeks ago for reference: https://i.imgur.com/42WFEyA.jpg
I clearly remember asking my gym teacher in middle school why my BMI suggests I was fat even though I clearly wasn't. He then proceeded to tell the entire class "he's a good example of someone who's labeled as fat, but isn't." Somewhat embarrassing.
Metabolically muscle is worse as it needs more oxygen and fuel. Which is one of the reasons body builders can often die young from a heart attack.
Those cancers are going to be mostly a function of height, not caring about weight for most people.
Neither of those is a reason to care about the ratio that BMI represents.
Gaining weight increases skin, which is why skin reduction surgery happens for people that lose lot's of weight. GIS for skin folds.
Weight / height ^2 is a proxy for both it's far from perfect, but it's also really easy to collect.