Peace be with you, "doesn't he" is the correct expression, because "isn't he" would be put in if you said in the first sentence:"He is happy". The phrase "Doesn't he" stands for the verb "say" and the phrase "isn't he" stands for the adjective "happy".
He says he is happy, doesn't he?
He is happy, isn't he?
I hope you have understood what I said. see you in the forums. Good luck