If you have an insurance policy in your home country and your insurance company is willing to sign the certificate, you can use that. Otherwise you're stuck with the Thai insurance company. And yes, you apply for the OA in your home country, although since introduction of eVisa in many countries, some people have reported they've been able to do this from other countries, although you have to show your flight details from your home country to Thailand
There's no downfalls, other than the fact that you do need health insurance, and show proof, either a certificate from your home country insurance company, or one of those expensive jobs from Thailand.
You get 365 days stamped in each time you enter, so you do a simple border bounce on day 364 of the visa, and get stamped back in for another year (often called "the free year" as you don't pay anything) - gives you two years
The list I got is generic. Perhaps not all immigration offices enforce it, but it is a requirement. Perhaps some in that Godforsaken toilet called Isaan probably don't bother 😂