As Arctic sea ice declines in response to climate change, a shift from thick multiyear ice to a thinner ice cover is occurring. With this transition, ice thicknesses approach a threshold below which ice no longer insulates the atmosphere from oceanic surface fluxes. While this is well known, there are no estimates of the magnitude of this threshold, nor of the proportion of sea ice area that is below this threshold as ice thins. We determine this threshold by simulating the atmospheric response to varying thicknesses, ranging from 0.0 to 2.0 m and determine that threshold to be 0.40–0.50 m. The resulting “effective” ice area is 4–14% lower than reported total ice area, as 0.39–0.97 × 10⁶ km² of the total ice area falls below the threshold throughout the twentieth century, including during notable ice minima. The atmosphere above large non-insulating ice-covered regions is susceptible to more than 2 °C of warming despite ice presence. Observed mean Arctic Ocean ice thickness is projected to fall below this threshold as early as the mid-2020s. Studies on ocean–atmosphere interactions in relation to sea ice area should focus on this insulating sea ice area, where ice is at least 0.40–0.50 m thick, and treat ice regions below 0.40–0.50 m thickness with caution.