Melt the butter in a large dutch oven or pot over medium heat. Add the onion and cook until tender, about 5 minutes. Whisk in the flour and cook until golden, 3-4 minutes, then gradually whisk in the half and half until smooth. Add the chicken broth, bay leaves and nutmeg, then season with salt and pepper and bring to a simmer. Reduce the heat to medium-low and cook, uncovered, until thickened, about 20 minutes.