I was playing 2/5 NL O8 with a $100 max bet/raise rule in Colorado last week when the following situation came up.

I was in the #3 seat and was dealt AA37 and raised to $25. The villain, a 70-ish year old man sitting directly across the table from me, raised $100. He had about $400 in front of him in reds. I decided to call instead of raise and see a flop (probably not the best line, but I'm pretty new to both Omaha and the $100 max bet rule).

The flop came 8-3-5 rainbow. I led out for $100 and here's where it gets interesting. Villain pulls out $200 in green from behind his stack and raises $100. He has about $200 on top of that in green so instead of playing against a player with $400, I discover that he has about $800 in total. The chips were not visible at all and had not come into play during the short time I had been sitting at the table. I had just come from the must-move table to the main game.

What should happen here, if anything, when I call for a floor?

There is no real standard RRoP ruling for this. All we have is:
With no direction on how to handle violations.

Unfortunately, many floors will probably not even see the problem and will just look at you funny and tell you to play on, or at worse give a lighthearted slap on the wrist. My guess is that most rooms do not have a standard policy about this, even though they should.

Minimally, the floor should give the player a warning about keeping large denom chips on top or in front, or else they will be ruled out of play on future hands.

In this case, since the issue was identified before you went all-in or anything like that, I would probably let the hand play on. Yes, I know you thinking he had 400 vs 800 may have affected your strategy and play prior to the discovery, but the amounts compared to the stack sizes would lead me to rule that you play on.

I would not be horribly offended if the hidden chips were ruled out of play for the hand, though, particularly if this is something that the player had been warned about previously.

Dealer may need to be talked to (after he pushes) about ensuring that large denom chips are not hidden, too. Not enough info in OP to say for sure.

FWIW, the TDA rule is as follows:
Note that they also don't detail what the penalty should be for violations, or how to handle action when large chips are discovered hidden mid-hand.

So he was directly across the table from your seat 3, so he was in seat 8?

The dealer should have been aware of the hidden stack since she has a better vantage point, but not all dealers are observant enough to notice it.

The only thing that can be done now is ask the dealer to have the player put his big chips up front.

The best way to handle hidden chips in the heads up scenario is to have them not play if the opponent objects at the time they become visible.

One interesting thing about this situation that is very different than the usual version is that there is a max bet. Because of this your exposure may not even be increased any way.

In this case it may have but your post is unclear. Did he have $400 in reds at the start of the hand? Or after he rasied you preflop? If he still had $400 after he raised you preflop then even after his raise on the flop your play of the hand could still limit your exposure to the amount of his visible chips (I'm not saying it can't still impact play though my guess in this scenario it won't much matter)

I make it a point to ask my opponent for a clear view of his chips if he is covering them with his arms. I also ask if there's any large-denomination chips behind. Always ask if you're unsure. It takes almost no time.

I agree.

9 times out of 10 the floor is going to warn the player to keep all higher denom chips visible and move on. You may get the one that says they don't play for this hand. If the dealer confirms they were purposely hidden, I have no issue with the floor saying they don't play. That's his fault for hiding them, but this is not a written rule so...

I say they're "purposely hidden" if they were definitely behind other stacks and not visible. Not in the sense that we are assuming the player did it to hide them maliciously.

One of the problems in trying to figure out if the chips were really hidden is that players tend to hold chips in their hands, and move chips around during play so when a floor person arrives at the table its hard to determine what the actual situation was at the relevant time period.

I think it's almost impossible to rule the hidden chips behind a stack are not in play if they were involve in an all-in bet. They would have to go to surveillance to see if the guy was purposely hiding them in his hand for them to be removed from the pot. And if someone did go all in and win the hand, of course they would want them all to be in play and won't even say anything. Only if they lose they will try to get them disqualified.

If they're behind a stack, 99% of the time it's just an innocent error but the supervisor will have an out and say "If you didn't know how many chips he had, you should have asked for a clear view of all his chips prior to going all in".

I've seen that more than once playing 2/5 back in the day when $100 bills still played at the Bellagio. Floor came over and ruled that black chips or folded bills located behind red stacks were out of play in an all-in situation. Never went to see the video.

Doesn't seem like a big deal to me. Who cares if he had $400 or $4000? It's a $100 max bet every street unless you raise so just check and call. Also why did you not check stacks while you sat down? A quick glance around the table as you set your chips down right before you take your seat would let you see everyone's stacks front to back and the different colors stand out pretty easily.

At 1-2 NLH this is often an innocent mistake by a beginner. At higher stakes this becomes more likely an intentional move by a more experienced player. A warning and a play on is enough unless this is a repeat offender IMHO.

you mean like Alec Torelli's alleged angle shoot

The idea here is that the player that objects is calling the floor over as soon as those chips are pulled out when he bets them. He calls attention to it before anymore action, so it's not like the player waited to see he lost before objecting. If he waited to see the outcome it would be a no brainer.