I need to know more information about this request.

-- Is this Company Medical insurance paid by company?
If it is company payment, you cannot add it to paychecks.

- Or do you need deduction it from employee paychecks and show it on stubs?
If it is deduction, please follow this article
http://www.halfpricesoft...ce-payroll-deduction.asp 

If you insurance is after-tax deduction, you do not need to check any exemptions.

Thank you.

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Our accountant wants Company Medical insurance added to payroll check so federal and state taxes can be deducted. She says it should not increase
the amount of gross pay on the paycheck. I cannot figure out how to do this with your software.

I hope this info will help with advise:

How to set up Health insurance (S-corporation medical) benefits provided to shareholders owning 2% or more of an S corporation who are also employees of the corporation are a non-Cash Fringe Benefit. The cost of the insurance premiums is considered part of the employee's total compensation for tax purposes.