In recent years, many low- and middle-income countries are experiencing public health reforms, and Vietnam is one of those leading countries moving towards universal health coverage. Nevertheless, the government is currently facing challenges in sustaining health finance and reaching the entire population due to issues surrounding the design of the scheme and organisational practice. Objectives This paper has two objectives. The first objective is to summarise the history of the health insurance scheme and its design by collecting information from official documents in order to provide up-to-date information for a better understanding of the Vietnamese health system. The second objective is to review existing reports and related literature to identify the challenges and problems arising from the design of the health insurance system including premiums, benefit packages and payment rules, and organisational practices such as health service delivery. Method To collect information, decrees and laws as well as existing documents and reports by Vietnamese government agencies and related literature are thoroughly reviewed. Results We found that the government needs major revision of premiums and subsidies in terms of complexity of the design such as subdivided premiums for different statuses and large subsidies that could lead to unsustainable health finance. Also, hidden distorted incentives of health service providers such as unnecessary expensive technologically advanced medical treatment and inappropriate prescription of drugs are challenges. These embezzlements have increased both OOP payment and the financial burden on the health insurance budget.