This paper concentrates on the simplest quasi-two-level PWM operation mode for modular multilevel converters, where the internal currents within the converter are not controlled. The model of the converter is derived and the properties of the inherent resonance circuit within the converter are discussed. The paper proposes an optimized design approach for the converter parameters and shows several challenges in the practical design. The main problem of the studied converter operation mode is the dependency of the converter behavior on many parasitic parameters that can significantly vary in the converter production. Moreover, the paper shows that when the converter losses are low, the optimized converter inductances are below the values expected for realistic converter construction. Consequently, the module capacitances have to be significantly increased or the converter internal currents reach exceedingly high values. Furthermore, a comparison is drawn to the quasi-two-level PWM operation mode in which the leg currents and branch energies are controlled, showing several crucial disadvantages of the studied passively damped operation mode. The utilized models and the basic concepts are validated experimentally on a downscaled converter prototype.