Does a valid insurance allow for a one-year extension on a type O-A visa if departing and returning within the visa's validity?

You have to have insurance to meet the requirements to enter Thailand when you use valid Non-OA and your permitted-until-stay stamp will be earlier one of 365days or the same as the insurance coverage period. You need to buy an insurance policy from one of The Thailand-approved insurance companies when you apply for a 1-year extension inside Thailand, not when you enter on Non-OA.

Sorry deleted a couple of comments.

We are not going into the insurance companies/policies recommendation thread.

While using the Multiple Entry Non Immigrant O-A visa before the valid until date you get stamped in for the period of one year or last date of health insurance, which ever comes first.